Economics AQA A Level Year 1 - Unit 2 Price Determination in a Competitive Market

Equilibrium Price

the price at which planned demand for a good or service exactly equals planned supply

Supply

the quantity of a good or service that a firm is willing an dable to sell at given prices in a given period of time

Demand

the quantity of a good or service that consumers are willing and able to buy at given price in a given period of time

Normal Good

a good for which demand increases as income, and demand falls when income falls

Competitive Market

a market in which the large number of buyers and sellers possess good market information and can easily enter or leave the market

Effective Demand

the desire for a good or service backed by an ability to pay

Market Demand

the quantity of a good or service that all consumers in a market are willing and able to buy at different market prices

Inferior Good

a good for which demand falls as incomes rise, and demand increases as income falls

Elasticity

the measure of responsiveness of one variable to changes in another variable

Price Elasticity of Demand

a measure of responsiveness of quantity demanded to a change in price

Income Elasticity of Demand

a measure of responsiveness of quantity demanded to a change in income

Cross Elasticity of Demand

a measure of responsiveness of quantity demanded of good X to a change in price of good Y

Market Supply

the quantity of a good or service that all firms in a market plan to sell at a given price

Profit

the difference between total sales revenue and total costs of production (TR-TC)

Total Revenue

the money a firm receives from selling its output

Price Elasticity of Supply

a measure of responsiveness of quantity supplied to a change in price

Market Equilibrium

when planned demand is equal to planned supply, and there is no excess demand or supply

Excess Supply

when a firm wishes to sell more than consumers wish to buy (price is above Pe)

Excess Demand

when consumers wish to buy more than firms are willing to sell (price is below Pe)

Joint Supply

occurs when the production of a product creates a by-product that can also be supplied

Competing Supply

when raw materials are used to produce one good they cannot be used to produce another good

Complementary Good

goods that are in joint demand, or a good whose use is related to the use of an associated or paired good

Substitute Good

a good in competing demand, namely a god which can be used in place of the other good

Composite Demand

where an increase in demand for one good or service will restrict its availability for another use

Derived Demand

demand for a product occuring as a result of demand for another good or service