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 bought together

E.g printers and ink cartridges.

Composite demand

Demand for a multi-purpose good

Condition of demand

Determinant of demand other than the good’s price, that sets the position of the good’s demand curve

Condition of supply

Determinant of supply other than the good’s price, that sets the position of the good’s supply curve

Customer sovereignty

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

Cross elasticity of demand (XED)

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