Chapter 3 Market demand and supply PART 1 Demand

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What is a market?

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A group of buyers and sellers of a particular good or service.

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What determines demand in a market?

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Buyers.

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Flashcards covering key concepts related to market demand and supply.

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22 Terms

1
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What is a market?

A group of buyers and sellers of a particular good or service.

2
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What determines demand in a market?

Buyers.

3
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What determines supply in a market?

Sellers.

4
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What does demand represent?

The choice-making behaviour of consumers.

5
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What does supply represent?

The decisions made by producers.

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What is the law of demand?

An inverse relationship between the price of a good and the quantity of units buyers are willing and able to purchase in a defined time period, ceteris paribus.

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What does a demand schedule show?

The specific quantity of a good or service that people are willing and able to buy at different prices.

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What type of slope does the demand curve have?

Negative/inverse.

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How is market demand derived?

Market demand is the horizontal summation of individual demand schedules.

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What causes changes in quantity demanded?

Changes in price only.

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How are changes in quantity demanded represented graphically?

As a movement along a demand curve.

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What is a change in demand?

A shift in the demand curve, either to the left or right.

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What causes a shift in the demand curve?

Any change that alters the quantity demanded at every price (non-price determinants).

14
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List the non-price determinants of demand.

Number of buyers in the market, tastes and preferences, income, expectations of buyers, and prices of related goods.

15
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How does an increase in income affect the demand for a normal good?

The demand for a normal good will increase.

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How does an increase in income affect the demand for an inferior good?

The demand for an inferior good will decrease.

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What are substitute goods?

When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes.

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What are complementary goods?

When a fall in the price of one good increases the demand for another good, the two goods are called complements.

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If the price of Good A increases, what happens to the demand for Good B if they are substitutes?

The demand for Good B increases.

20
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If the price of Good A decreases, what happens to the demand for Good B if they are substitutes?

The demand for Good B decreases.

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If the price of Good A increases, what happens to the demand for Good B if they are complements?

The demand for Good B decreases.

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If the price of Good A decreases, what happens to the demand for Good B if they are complements?

The demand for Good B increases.