markets

market

A platform either online or tangible where buyers and sellers can meet to sell or exchange goods and services

Sub market

A smaller part of a wider market

Demand

The amount of a good or service consumers are willing and able to purchase at different prices

Notional demand

The desire to buy a product

Effective demand

The ability and willingness to buy a product

What does an increase in price cause in demand

Contraction

What does. A price decrease cause in demand

Expansion

Consumer surplus

Difference between what consumers are willing to pay for a good or service and what they actually pay

Calculation of total revenue

Price x quantity

Factors affecting demand

Trends, season, income, preference

Normal goods

Foods we consume more of as income increases. Eg restaurants

Inferior goods

Goods we consume less of as income increases. Eg bus travel

Supply

The quantity of a good or service producers are willing and able to provide at different prices over time

Calculation of profit

Total revenue - costs

If price goes up what happens to supply

Increase in supply

Producer surplus

The difference between what a producer is willing to sell a good or service at and what they actually sell it for

Factors affecting supply

Conflict, costs, weather

What does price cause the supply curve to do

Not shift

What does a left shift in supply curve cause

Increased price

3 functions of price mechanism

Signalling, rationing, transmission of preferences

define the price mechanism

how the decisions of consumers and businesses interact to determine the allocation of resources

what does a change in price cause on demand curve

movement along the line

Signalling function

Shows producers where to match supply with consumer demand as it fluctuates

Rationing function

Prices reflect scarcity of resources when demand in a mark out outstrips supply

Transmission of preferences

Consumers sending information about there changing needs to producers

Market equilibrium

Where demand and supply are equal

Disequilibrium

Where supply and demand aren’t equal

When supply is greater than demand what happens to price

Price will fall

When demand is greater than supply what happens to price

Price will increase

What happens to price and output if demand curve shifts right

Both increase

What happens to price and output if demand curve shifts Left

Both decrease

What happens to price and quantity when supply curve shifts left

P increase, Q decrease

What happens to price and quantity when supply curve shifts right

P decrease, Q increase