Price determination in a competitive market

What is competing supply?

When resources can be used to produce one good or another good, not both

What are competitive markets?

A market with large numbers of buyers and sellers, with low barriers to entry and exit

What are complementary goods?

Goods in joint demand; these goods are often bought together, e.g. printers and ink cartdriges

What is composite demand?

Demand for a multi-purpose good

What is condition of demand?

Determinant of demand other than the good’s price, that sets the position of the good’s demand curve

What is condition of supply?

A determinant of supply other than the good’s price, that sets the position of the good’s supply curve

What is customer sovereignty?

Consumers can collectively govern production in a market via exercising spending power. Strongest in perfectly competitive markets

What is cross elasticity of demand (XED)?

Measures the responsiveness of a good’s demand to a change in the price of a different good

What is demand?

The quantity of a good or service that a consumer is willing and able to buy at a given price and given time

What is derived demand?

Demand for a good that is the input of another good

What is disequilibrium?

Excess supply or demand in a market

What is effective demand?

Desire for a good or service that is backed by the ability to pay for said good or service

What is elasticity?

The proportionate responsiveness of a second variable to change in a first variable

What is equilibrium?

No excess supply or demand in a market; a state of balance between opposing forces

What is equilibrium price?

The price where planned demand matches planned supply

What is excess demand?

When consumers want to buy more than producers are willing to sell; occurs below equilibrium price

What is excess supply?

When produces want to sell more than consumers are willing to buy; occurs above equilibrium price

What is exchange?

Trading objects of value, utilising media of exchange e.g. money

What is income elasticity of demand (YED)?

Measures the responsiveness of a good’s demand to a change in the incomes of consumers

What is an inferior good?

A good for which demand rises as incomes fall

What is joint supply?

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

What is a normal good?

A good for which demand rises as incomes rise

What is price elasticity of supply?

Measures the responsiveness of a good’s supply to a change in price

What is producer sovereignty?

Producers determine what is produced and the prices charged

What is a substitute good?

A good in competing demand; a good that can be used in place of another similar good

What is supply?

The quantity of a good or service that a producer is willing and able to sell at a given price, at a given time