choter 2: compettive marjets : demand snd supply

demand

the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific time period

individual demand

the demand of one person for a product

the law of demand

as the price of a product decreases the quantity demanded of it increases

non price déterminâtes of demand

normal foods, inferior foods, substitute goods, complementary goods, unrelated goods, tastes and preferences, future expectations, future expectations, number of consumers, government policy, seasonal changes,

assumptions underlying the law of demand (hl)

income effect, substitution effect, law of diminishing marginal utility

law of diminishing marginal utility

the principle that as additional units of a good or services are consumer, the marginal utility will decline

normal good

a good whose demand increases as peoples income increase

inferior good

goods whose demand decreases as people’s incomes increase

substitue goods

goods that have similar characteristics and use for consumers

complementary goods

goods that are consumed together

utility

the satisfaction that consumers gain from consuming something

supply

the quantity of a good or service that producers are willing and able to offer at various prices, ceteris paribus

the law of supply

as the price of a product increases, the quantity supplied will usually increase, ceteris paribus

non price determinate of supply

costs of production, technological change, future expectations, number of firms, price of related goods, government intervention

short run

the time period during which at least one input is fixed and cannot be changed by the firm

long run

the time period when all inputs can be changed

marginal cost

the extra or additional cost of producing one more unit of output

market equilibrium

the price where the quantity demand equals the quantity supplied

price mechanism

the way i’m which price changes affect quantity demanded and quantity supplied, thus determine resource allocation in the market

consumer surplus

the highest price consumers are willing to pay for a good minus the price actually paid

producer surplus

the difference between he price producers are willing and able to sell it and the price earned from seeking the good at market price

social/ community surplus

thr totally benefit gained by society when the market is at equilibrium

welfare loss

the reduction in social surplus because the market fails to reach allocative efficiency

rational behaviour

the baha’i our of a consumer or producer that seeks to maximise utility or profit

bounded rationality

the idea that human rationality is limited in predictable ways

imperfect information

a situation in which the parties to a transaction have limited information

bounded self control

the idea that human beings have some self control, but is it limited

bounded selfishness

the idea that human beings are somewhat selfish

choice artichecture

the way choices are structured for consumers

default choice

original choice but can be changed if they want

restricted choice

a situation where consumer choices are limited

mandated choice

where am organisation forces a consumer to make a choice at a defined point in time

profit maximisation

the process by which a firm determines the price, input and output at a level that result in the highest profit