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21 Cards in this Set
- Front
- Back
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1. What is a market? |
Where buyers and sellers come together to trade (not necessarily physical) |
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2. How is the price of a good determined in a market economy? |
By the interaction of demand and suppply |
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3. What are product markets? |
Goods and services are bought and sold |
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4. What are factor markets? |
Where factors of production are bought and sold (e.g. labour market, commodities market etc) |
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5. What is demand? |
The quantity of a good or service that consumers are willing and able to purchase at a given price in a given time period |
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6. What is the gradient of a demand curve? |
It is negative |
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7. What is the law of demand? |
As the price of a product decreases, the quantity demanded of the product will usually increase, ceteris paribus |
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8. What will cause an increase in demand? |
- The income effect - a decrease in price increases real income (e.g. sale inn fashion stores) - substitution effect - when the price of a product is decreased it will be relatively more attractive to people (e.g. flying when compared to taking a bus) |
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9. What are non-price determinants of demand? |
Factors that lead to a shift of the demand curve to the right or left |
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10. List three non-price determinants of demand |
1. Income 2. Price of other products 3. Tastes/preferences |
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11. What is a normal good? |
Goods that you buy more of when you have more money (e.g. clothes, technology) |
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12. What are inferior goods? |
Goods that you will avoid when you have more money (demand disappears) e.g. going by bus |
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13. How does increased income affect normal and inferior goods? |
Increased income increases demand of normal goods and decreases demand for inferior goods |
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14. What are substitute goods? |
An increase in the price of one good will result in an increase in the demand for the other |
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15. What are complementary goods? |
An increase in the price of one goods results in a decrease in the demand for the other |
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16. What other factors affect the demand for a good? |
- size of the population - changes in the age structure in the population - changes in income distribution - government policy changes - seasonal changes |
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17. How does a change in the price of the good affect the demand curve? |
It creates movement along the demand curve |
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18. How will a change in any other factor affect the demand curve? |
It will create a shift of the whole curve |
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19. What is the function for demand? |
Qd = a - bP where b is the slope, a is the y intercept and P is price |
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20. What happens when a changes? |
We have a shift |
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21. What happens when b changes? |
We have a change in slope |
