cht2 eco

• What is a market?

  A place where people buy and sell things
• What is required for a deal to be considered a market transaction?

  Both buyer and seller must agree
• Why is a forced sale not a real market?

  It is unfair and lacks agreement
• Do markets need a physical location?

  No, they can happen anywhere
• How have markets changed with the internet?

  Buying and selling can happen 24/7
• What is a competitive market?

  A market with many buyers and sellers
• What determines the price in a competitive market?

  Supply and demand set the price
• What is equilibrium price?

  The price where supply equals demand
• What does supply mean?

  How much sellers are ready to sell
• What does demand mean?

  How much buyers want to buy
• What makes a market competitive?

  Easy to join or leave and fair information
• What are the characteristics of a competitive market?

  • Many buyers and sellers
  • Prices set by supply and demand
  • Easy to enter or exit
  • Fair and clear information
• What are the two kinds of markets people and businesses are part of?

  Goods markets and factor markets
• What is effective demand?

  Wanting something and being able to pay
• How do households create effective demand?

  By earning money through work or renting
• What does this chapter focus on?

  How people demand goods and services
• What is market demand?

  The total amount of a product people want
• How is individual demand defined?

  What one person wants to buy
• How are market demand and individual demand connected?

  Market demand is the sum of individual demand
• What is the law of demand?

  Price decreases lead to increased demand
• What does "inverse relationship" mean in demand?

  Price and demand move in opposite directions
• Why is "law" in quotes in economics?

  It has exceptions unlike scientific laws
• Does the law of demand always hold true?

  No, there are exceptions to the rule
• What are some exceptions to the law of demand?

  Luxury goods, essentials, and speculation
• What is a demand curve?

  A graph showing quantity demanded at prices
• What does the demand curve illustrate?

  As prices decrease, demand increases
• What do the vertical and horizontal axes of the demand curve represent?

  Vertical: price; Horizontal: quantity demanded
• Does demand remain constant over time?

  No, it changes with different time periods
• What happens when the price changes on the demand curve?

  Movement along the curve occurs
• What causes shifts of the demand curve?

  Changes other than price, like income
• What are conditions of demand?

  Factors affecting demand besides price
• What causes an increase in demand?

  Curve shifts right when demand increases
• What causes a decrease in demand?

  Curve shifts left when demand decreases
• What is elasticity in economics?

  Measure of how one thing changes with another
• What is elastic demand?

  Demand changes significantly with price changes
• What is inelastic demand?

  Demand changes little with price changes
• What is unit elastic demand?

  Change in price causes equal change in demand
• Why is elasticity useful?

  Helps understand buying habits with changes
• What is price elasticity of demand?

  Measures change in buying with price changes
• What is the formula for price elasticity of demand?

  Price elasticity = % change in quantity demanded ÷ % change in price