Competitive Markets

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What is a market?
A market is anywhere buyers and sellers can exchange goods and services
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What is demand?
Demand is the quantity of a good/service that consumers are willing and able to buy at different prices
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What is the income effect?
As price falls, the amount consumers can buy with their income increases, and so demand increases
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What are substitute goods? Give an example
Goods that are alternatives to each other e.g. beef and lamb
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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
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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
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What is composite demand?
Demand for goods that have multiple uses e.g. oil is used to make plastics and fuel
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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
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What does a PED greater than 1 suggest?
It suggests that the good has relatively elastic demand.
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What does a PED between 0 and 1 suggest?
It suggests that the good has relatively inelastic demand
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What does a PED of 1 suggest?
It suggests that the good has unit elasticity
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What is income elasticity of demand? (YED)
A measurement pf how much the demand for a good changes with real income
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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
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What is the formula for XED?
% Change in QD of Good A divided by % Change in price of Good B
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What is supply?
Supply is the quantity of a good or service thar producers supply to a market at a given price
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Other cards in this set

Card 2

Front

What is demand?

Back

Demand is the quantity of a good/service that consumers are willing and able to buy at different prices

Card 3

Front

What is the income effect?

Back

Preview of the front of card 3

Card 4

Front

What are substitute goods? Give an example

Back

Preview of the front of card 4

Card 5

Front

What are complementary goods? Give an example

Back

Preview of the front of card 5
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