a market situation in which there are a large number of buyers (demand) and sellers (supply)
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Monopoly
a situation where there is only one firm selling in a market. For example, before 2006, Royal Mail was a monopoly.
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Monopoly power
when a firm has more than 25% of the market share. Tesco has a legal monopoly in the supermarket industry, holding approx 31% of the total market share.
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Demand
the quantity buyers are willing and able to buy at a given price in a given period of time.
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Effective demand
for demand to be effective, a consumer must be both willing and able to buy the good or service. 'Willing' means they want it and 'able' means they have the money to buy it e.g. if you want a bike that costs £500 and have £500 to spend.
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Contraction of demand
the fall in quantity demanded due to a rise in price
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Extension in demand
the increase in quantity demanded due to a fall in price
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Inferior goods
goods for which demand falls when income rises. For example, bus journeys. As people's incomes rise, they can afford to buy their own vehicles and the demand for bus journeys falls.
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Interest rates
The extra a person pays the bank when borrowing money and the rewards for saving.
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Complements
Complementary goods are goods that are in joint demand - if you buy one, you will need to buy the other e.g. a DVD player and DVDs.
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Substitutes
Goods that can be used instead of each other e.g. Pepsi and Coke.
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Price Elasticity of Demand (PED)
PED measures the responsiveness of the quantity demanded to a change in the price of a good. PED % change in demand divided by % change in price.
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Total revenue
the amount of money a firm receives when selling its product. Total revenue = price x quantity sold.
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Supply
the quantity a producer is willing and able to produce at a given price in a given period of time
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Price Elasticity of Supply (PES)
PES measures the responsiveness of quantity supplied to a change in price.
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Perfectly inelastic demand
The quantity demanded remains the same, although price changes i.e. demand is completely unresponsive to a change in price (0).
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Inelastic demand
The quantity demanded changes at a lesser rate than price (
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Unit elastic demand
The quantity demanded changed at the same rate as the price (1)
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Elastic demand
The quantity demanded changes at a greater rate than price (>1)
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Perfectly inelastic demand
Any quantity is demanded at a given price (Infinity)
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Perfectly inelastic supply
The quantity supplied remains the same as the price changes i.e. supply is completely unresponsive to a change in price (0)
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Inelastic supply
The quantity supplied changes at a lesser rate than price (
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Unit elastic supply
The quantity supplied changes at the same rate as the price (1)
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Elastic supply
The quantity supplied changes at a greater rate than price (>1)
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Perfectly elastic supply
Any quantity is supplied at a given price (Infinity).
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Equilibrium
the point where demand and supply meet
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Specific tax
a tax placed on a good or service which is a specific amount of money per unit bought e.g. £2 tax on each bottle of wine.
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Ad valorem tax
a tax placed on a good or service which is a percentage of the price
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Subsidy
A payment given to a firm, usually by the government
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Minimum price
A price set above the equilibrium and the price is not allowed to go below it
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Maximum price
A price set below the equilibrium and price is not allowed to rise above this level.
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Other cards in this set
Card 2
Front
a situation where there is only one firm selling in a market. For example, before 2006, Royal Mail was a monopoly.
Back
Monopoly
Card 3
Front
when a firm has more than 25% of the market share. Tesco has a legal monopoly in the supermarket industry, holding approx 31% of the total market share.
Back
Card 4
Front
the quantity buyers are willing and able to buy at a given price in a given period of time.
Back
Card 5
Front
for demand to be effective, a consumer must be both willing and able to buy the good or service. 'Willing' means they want it and 'able' means they have the money to buy it e.g. if you want a bike that costs £500 and have £500 to spend.
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