supply and demand, interrelationships, elasticity

supply

how willing and able producers are to produce a good or service for a given price

demand

how willing and able consumers are to buy a good or service at a given price

excess supply

when quantity supplied is more than quantity demanded

excess demand

when quantity demanded is more than quantity supplied

factors causing supply to increase/decrease (pints wc)

productivity, indirect taxes, number of firms, technology, subsidies, weather, costs of production

factors causing demand to increase/decrease (pasific)

population, advertisement, substitute goods, immigrants, fashion/trends, income, complement goods

equilibrium

when supply=demand, there is no incentive for quantity or price to change

a movement on a curve

change in price, either a contraction or extension

a shift of the curve

a change in non-price factors e.g. PASIFIC or PINTS WC

consumer surplus

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays

producer surplus

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

complement goods

goods in joint demand

substitute goods

competing goods that can be used in place of one another

competing supply

goods that are in competition for a common factor of production

joint supply

when one good is produced, another good is also produced from the same raw materials

a change in supply of one good causes a change in supply of another

derived demand

when demand for a good comes largely from another market

composite demand

demand for a good which has more than one use e.g. land for housing or a factory.

elasticity

proportional change caused by a proportional change in another variable

price elasticity of demand

the percentage change in quantity demanded due to a percentage change in price

how responsive consumer demand is to change

price elasticity of supply

the percentage change in quantity supplied divided by the percentage change in price

cross elasticity of demand

measures the responsiveness of quantity demanded of a good or service given a change in price of another

income elasticity of demand

measures the responsiveness of quantity demanded given a change in income