3.1.3 Price determination in a competitive market

What is a market?

A situation in which buyers and sellers come together to engage in trade

What is a competitive market?

A situation where there are a large number of potential buyers and sellers with abundant information about the market

What is the equilibrium price in a market?

The price at which the planned demand of consumers equals the planned supply of firms

What is demand?

The quantity of a good or service that consumers are willing and able to buy at given prices in a particular time period

What is effective demand?

Consumers’ desire to buy a good, backed up by the ability to pay

What are the conditions of demand?

Factors other than the price of the good that lead to a change in position of the demand curve

What is taxation?

. A charge placed by the government on various forms of economic activity

. Most taxes are on forms of income and types of spending

What is a subsitute?

A good that may be consumed as an alternative to another good

What is a complement good/service?

A good/service that tends to be consumed with another good

What is supply?

The quantity of a good or service that firms plan to sell at given prices in a particular time period