3.1

Created by

alicia jarosz

Cards (31)

Market definition
A voluntary meeting of buyers and sellers with exchange taking place
demand definition
the quantity of a good or service that consumers are willing and able to buy at given prices in a given period of time
supply definition
the quantity of a good or service that producers are willing and able to sell at given prices in a given period of time
competitive markets
Markets in which the large number of buyers and sellers possess good market information and can easily enter or leave the market
ruling market price (equilibrium price) definition
the price at which planned demand equals planned supply
effective demand definition
the desire for a good or service backed by an ability to pay
market demand definition
the quantity of a good or service that all the consumers in a market are willing and able to buy at different market prices
individual demand definition
the quantity of a good or service that a particular consumer or individual is willing and able to buy at different market prices
What are the main determinants of demand?
price of the good
Income
Prices of related goods (substituted and complements)
Tastes and preferences
Expectations of future prices
Population and demographics
Advertising
how does income affect demand?
normal goods: demand increases as income increase
inferior goods: demand decreases and income increases
how do substitute goods affect demand?
if the price of a substitute rises, demand for the original good increases
how do complementary goods affect demand?
if the price of a complementary goods rises, demand for the original good decreases
how do tastes and preferences affect demand?
if a product becomes fashionable or desirable, demand increases
how do expectations of future prices affect current demand?
if consumers expect prices to rise in the future, current demand increases
if they expect prices to fall, current demand decreases
how does advertising affect demand?
effective advertising can increase consumer awareness and preferences, boosting demand
how does population size affect demand?
as population increases, demand for most goods and services tends to rise
mnemonic for factors that shift demand curve
PIRATES:
population
income
related goods
advertising
tastes and fashions
expectations
seasons
conditions of demand definition
a determinant of demand, other than the goods own price, that fixes the position of the demand curve
substitute goods definition
alternative goods that could be used for the same purpose
complementary goods defintion
when two goods are complements, they experience joint demand
increase in demand…
rightwards shift of the demand curve
decrease in demand…
leftwards shift of the demand curve
what is the ‘law of demand’?
states that as good‘s price falls, more is demanded - inverse relationship between price and quantity demanded
what is willingness to pay?
desire to pay based on tastes and preferences
what is ability to pay?
factors in a person’s income, and whether they can afford the good or service or not
normal good defintion
a good for which demand increases as income rises and demand decreases as income falls
inferior good definition
a good for which demand decreases as income rises and demand increases and income falls
demand means effective demand, based on willingness and ability to pay
what does a market demand curve show?
how much of a good all the consumers in the market intend to buy at different prices
which direction does the demand curve slope?
downwards
what do the conditions of demand do?
fix the position of the demand curve (shifts)