Derived demand occurs when one good is necessary for the production of another.
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What is excess demand?
When consumers wish to buy more than firms wish to sell, and the price is then below equilibrium.
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What is market supply?
The quantity of a good or service that all firms in the market are willing to sell.
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What is supply?
The quantity of a good or service that firms plan to sell at given prices, at a given period of time.
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What is the main objective of a firm?
Profit Maximisation, which is a process that companies undergo to determine the best output and price levels in order to maximise its return.
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What are the conditions of supply?
Conditions of supply are; cost of production, technical progression, taxes and subsidies.
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What is the cost of production?
Wage costs, raw material prices, energy costs and the cost of borrowing.
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What is expenditure tax?
A tax levied by the government on spending by consumers. The firms selling the good pay the tax to the government, but customers pay indirectly via a rise in the price of the good.
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What is Ad Valorem tax?
A percentage expenditure tax, such as VAT.
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What causes supply to increase?
Subsidies, technological advances and decrease in the cost of production.
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What causes supply to decrease?
Taxes, increase in the cost of production, bad harvests and an increase in wage.
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What is equilibrium?
A state of rest between opposing forces, for example supply and demand.
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What is market equilibrium?
When planned demand meets planned supply in a market.
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What is market disequilibrium?
When a market fails to clear. The market plans of consumers and firms are inconsistent with each other.
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What is a normal good?
A good for which demand increases as income rises (e.g luxury brands)
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What is an inferior good?
A good for which demand falls as income increases (e.g Primark)
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What is a social cost?
The total cost of an activity, including the external cost as well as the private cost.
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What is a marginal benefit?
The benefit resulting from the last unit of a good.
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What is a marginal cost?
The cost of the last unit of a good.
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What does social cost =?
Social Cost= Private Cost + External Cost
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Other cards in this set
Card 2
Front
Derived demand occurs when one good is necessary for the production of another.
Back
What is derived demand?
Card 3
Front
When consumers wish to buy more than firms wish to sell, and the price is then below equilibrium.
Back
Card 4
Front
The quantity of a good or service that all firms in the market are willing to sell.
Back
Card 5
Front
The quantity of a good or service that firms plan to sell at given prices, at a given period of time.
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