Market- a set of arrangements that allow buyers and sellers to communicate and exchange goods and services. Market System/price mechanism- The automatic determination of prices and the allocation of resources by operation in of markets is an economy.
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Factors the affect Demand:
Price, Income, Fashion and trends, Marketing and advertising,Price of substitutes, Price of complementary goods, Population (age, ethnic, gender and regional distribution.)
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Factors that affect Supply
Price, Technological advancements, Natural Factors, Costs of Production, Subsidies, Indirect Taxation, Price of other goods
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Market equilibrium/Market clearing price
Demand = Supply Quantity supplied is completely bought bu consumers. No unsold stock Total Revenue = price * quantity
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Price Elasticity of Demand
PED is the responsiveness of demand to changes in price PED = % change in Quantity Demanded/ % change in Price Factors affecting PED: - Availability of substitutes - Degree of necessity - Proportion spent on income - Time (in the long run you are m
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Price Elasticity of Supply
PES is the responsiveness of supply to changes in price PES= % change in Quantity Supplied/ % change in Price Factors affecting PES: - Time - Stocks - Spare Capacity - Production Speed - Ease of entry into the market - Mobility of production fact
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Income Elasticity of Demand
YED is the responsiveness of demand to changes in income YED = % change in Quantity Demanded/ % change in Income Factor affecting YED: Luxury good vs necessity: + = normal good - = inferior good
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Applications of elasticity
Firms: Change in Price= Change in total Revenue Firms know the effect that changes in price bring to their revenue. They know if their product is more price elastic or inelastic. Income Elasticity and Firms: Changes in Income will affect demand for
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The Basic Economic Problem
Infinite wants > Finite or scarce resources Demand > Supply What, How & For Whom to produce? Basic Economic Problem - allocation of a nation's scarce resources between competing uses that represent infinite wants.
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Choice and Opportunity Cost
Individuals: how to spend their limited budget Firms: Spend on marketing, education and training or capital products. Government: Welfare benefits, new public services, weaponry. Opportunity Cost: when choosing between different options it is the
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Other cards in this set
Card 2
Front
Factors the affect Demand:
Back
Price, Income, Fashion and trends, Marketing and advertising,Price of substitutes, Price of complementary goods, Population (age, ethnic, gender and regional distribution.)
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