What is a market?
A group of buyers and sellers of a particular good or service.
What determines demand in a market?
Buyers.
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Flashcards covering key concepts related to market demand and supply.
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What is a market?
A group of buyers and sellers of a particular good or service.
What determines demand in a market?
Buyers.
What determines supply in a market?
Sellers.
What does demand represent?
The choice-making behaviour of consumers.
What does supply represent?
The decisions made by producers.
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.
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.
What type of slope does the demand curve have?
Negative/inverse.
How is market demand derived?
Market demand is the horizontal summation of individual demand schedules.
What causes changes in quantity demanded?
Changes in price only.
How are changes in quantity demanded represented graphically?
As a movement along a demand curve.
What is a change in demand?
A shift in the demand curve, either to the left or right.
What causes a shift in the demand curve?
Any change that alters the quantity demanded at every price (non-price determinants).
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.
How does an increase in income affect the demand for a normal good?
The demand for a normal good will increase.
How does an increase in income affect the demand for an inferior good?
The demand for an inferior good will decrease.
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.
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.
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.
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.
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.
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.