paper 1- Topic 2 price determination in a competitive market

competing supply

when resources can be used to produce one good OR another good not both

Competitive markets

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

complementary goods

Goods in joint demand these goods are often brough together e.g. printers and ink cartridges

composite demand

demand for a multi purpose good

condition of demand

A determinant of demand other than the goods price that sets the position of the goods demand curve.

condition of supply

A determinant of supply other that the good price that sets the position of the goods supply curve

Customer sovereirgnty

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

Cross elasticity of demand

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

Demand

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

derived demand

demand for a good that is the input of another good

disequilibrium

excess supply or demand in a market

effective demand

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

elasticity

the propionate responsiveness of a second variable to a change in a first variable

equilibrium

No excess supply or demand in a market when supply=demand

excess demand

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

Excess supply

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

exchange

trading objects of value

Income elasticity of demand

measures the responsiveness of a goods demand to a change in the incomes of consumers

inferior good

a good for which demand rises as incomes fall

joint supply

when one good is produced another good is also produced from the same raw materials

normal good

a good for which demand rises as incomes rise

price elasticity of supply

measures the responsiveness of a goods supply to a change in price

producer sovereignty

producers determine what is produced and the prices charged

substitute good

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

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.