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13 Cards in this Set
- Front
- Back
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What is demand?
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1. Demand is the willingness and want of consumers to buy goods and services.
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What does Ceteris Parabis refer to?
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2. Ceteris Parabis refers to a movement on a demand curve, when only price is a factor that affects it.
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7. What are complements and substitutes.
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7. Complements are goods that come together, are jointly demanded. One good needs another good to work properly. Substitutes are similar goods where ones change in price affects the others demand oppositely.
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. What is an extension/contraction of demand?
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3. An extension of demand refers to an increase in quantity demanded with a fall in price. A contraction of demand refers to the quantity demanded for a product to fall as price rises.
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8. What is supply & the market supply.
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8. Supply is the amount of goods and services producers are willing to make and sell at a given price. The market supply of a commodity includes all the competing producers willing to produce goods and services at a given price.
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4. What does Utility refer to in economiclaw of diminishing marginal utility?
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4. Utility refers to the satisfaction a consumer gains from buying goods and services. The law of diminishing marginal utility refers to the fact that the more of a commodity a consumer has, the less utility he/she gets from it.
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9. What causes shifts in supply? (2 causes)
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9. Weather, technical progress, changes in costs of factors of production, changes in prices of other commodities
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5. Explain an increase and a fall in demand and how would each be displayed on a demand-supply diagram?
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5. An increase in demand refers to consumers wanting to buy more of a product at each and every price, whereas a decrease in demand refers to consumers wanting to buy less of a product at each and every price. An increase is shown as a shift to the right on a DSD an a decrease is shown as a shift to the left on a DSD.
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10. What is excess demand and excess supply?
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10. Excess demand refers to the quantity demanded being higher than the quantity supplied. Excess supply refers to the quantity supplied being higher than the quantity demanded
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6. Give 4 factors that cause shifts in demand.
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6. Advertising, Weather, Changes in people’s income, changes in income taxes, Changes in population, Changes in the prices of other goods, changes in fashion, Interest rates (low, spend more, high, save more)
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11. What is the equilibrium price? Disequilibrium?
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11. The equilibrium price is the market price where the quantity demanded of a good is satisfied with the quantity supplied. Disequilibrium = (Quantity demanded =/= Quantity supplied)
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12. What is the price elasticity of demand?
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12. Price elasticity of demand refers to how much a change in price would affect demand. If a good is elastic, that means a small change in price will result to a bigger change in demand, whereas if a good is inelastic, then a change in price will have little change in demand.
Price elasticity of Demand / ED = % Change in quantity demanded/ % Change in price. When ED is greater than 1, then the demand for a good is price elastic. If ED is smaller than one then a good is inelastic. |
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13. What is income elasticity of demand & cross elasticity.
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13. Income elasticity of demand refers to how much a change in income would affect the quantity demanded. Income Elasticity of demand / YED = % change in quantity demanded/ % change in income
If YED is bigger than 1 then its income elastic, if not, income inelastic. If it’s a negative number, then the good is an inferior good. If positive, then it’s a normal good. Cross elasticity of demand refers to how a change in the price of one good affects the demand of another good. XED = % change in quantity of good x / % change in price of good Y. If the result is positive, then the two goods are substitutes. If negative, then they’re complements. |
