Competitive Markets 0.0 / 5 ? EconomicsCompetitive marketsA2/A-levelAQA Created by: Jackson231Created on: 26-01-19 18:46 What is a market? A market is anywhere buyers and sellers can exchange goods and services 1 of 15 What is demand? Demand is the quantity of a good/service that consumers are willing and able to buy at different prices 2 of 15 What is the income effect? As price falls, the amount consumers can buy with their income increases, and so demand increases 3 of 15 What are substitute goods? Give an example Goods that are alternatives to each other e.g. beef and lamb 4 of 15 What are complementary goods? Give an example Goods that are often used together, so they're in joint demand e.g. strawberries and ice cream 5 of 15 What is derived demand? Demand for a good or factor of production used to make other goods e.g. increased demand for fencing leads to an increased derived demand for wood 6 of 15 What is composite demand? Demand for goods that have multiple uses e.g. oil is used to make plastics and fuel 7 of 15 What is the price elasticity of demand? (PED) A measure of how the quantity demanded of a good responds to a change in its price 8 of 15 What does a PED greater than 1 suggest? It suggests that the good has relatively elastic demand. 9 of 15 What does a PED between 0 and 1 suggest? It suggests that the good has relatively inelastic demand 10 of 15 What does a PED of 1 suggest? It suggests that the good has unit elasticity 11 of 15 What is income elasticity of demand? (YED) A measurement pf how much the demand for a good changes with real income 12 of 15 What is cross elasticity of demand? (XED) A measure of how the quantity demanded of one good responds to a change in price of another good 13 of 15 What is the formula for XED? % Change in QD of Good A divided by % Change in price of Good B 14 of 15 What is supply? Supply is the quantity of a good or service thar producers supply to a market at a given price 15 of 15
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