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7 Cards in this Set
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- Back
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Demand and supply |
Demand - Amount consumers are willing and able to buy at each given price Supply - Amount suppliers are willing and able to supple at each given price |
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Normal and interior goods |
Normal - Goods that will increase in demand when income rises Interior - Goods that will decrease in demand when income rises |
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Complementary and substitute goods |
Complements - Goods that are consumed together Substitutes - Goods that are consumed in exchange of a similar good |
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Composite demand |
A good that is demanded for more than one purpose so that and increase in demand for one purpose reduces the available supply for the other purpose, typically leading to higher prices e.g. milk used in butter and cheese |
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Derived demand |
When the demand for one good/service comes from the demand from another good/service e.g. car stimulates demand for steel, therefore demand for steel is derived demand |
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Equilibrium |
The price at which demand is equal to supply and there is no tendency for change |
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Excess supply and demand |
Excess supply - When supply at a particular price is greater than demand, this signals producers to lower price Excess demand - When demand is greater than supply at a given price, this signals producers to increase price |
