# microeconomics

HideShow resource information
Outline the meaning of the term 'market'
A platform where buyers and sellers of a good can engage in trade.
1 of 19
Outline the law of demand
That as the price of a good increases, the quantity demanded will decrease, ceteris paribus.
2 of 19
Explain the function of a demand curve
To visually represent the negative causal relationship between price and quantity demanded
3 of 19
List the non-price determinants of demand
Changes in income, preferences, prices of related goods, and demographic changes.
4 of 19
Distinguish between movements along the demand curve and shifts of the demand curve
A movement along denotes a change in price. A shift denotes a change in a non-price determinant.
5 of 19
Outline a demand function
Qd=a-bP where Qd=Quantity demanded, b=gradient, P=price, and a determines the placement of the curve
6 of 19
Outline the law of supply
That as the price of a good increases, the quantity supplied will also increase.
7 of 19
Outline the non-price determinants of supply
Cost of factors of production (LLCE), technology, prices of related goods, market expectations, indirect taxes and subsidies, and the number of firms in the market
8 of 19
Outline the factors of production
LLCE - Land, Labour, Capital, Entrepeneurship
9 of 19
Distinguish between movements along the supply curve and shifts of the supply curve
A movement along the supply curve is caused by a change in price, whereas a shift of is caused by non-price determinants.
10 of 19
Outline a supply function
Qs=c+dP where Qs=Quantity supplied, d=gradient, P=price, and c determines the placement of the curve.
11 of 19
Define and explain market equilibrium
The market state where supply=demand; where consumers are buying as much as they are willing and able to, and producers are selling as much as they are willing and able to, and they meet at the same price
12 of 19
Analyse how changes in the determinants of demand and/or supply result in a new market equilibrium
If either curve shifts, the point where D=S will change, resulting in a different market equilibrium. If there is a movement along either curve, it will result in excess demand or supply, remedied either by a shift of a curve, or by another movement.
13 of 19
Explain why scarcity necessitates choices that answer the "what to produce" question
Scarce resources are allocated in response to price signals, which indicate the targets of consumer demand. A higher price would indicate a larger demand, and incentivise producers to make more of the good, resulting in higher profits.
14 of 19
Define opportunity cost, and explain why choice results in opportunity cost
Opportunity cost is the value of the next best alternative foregone. Therefore, whenever there is an alternative, or choice, there is an opportunity cost.
15 of 19
Explain the concept of consumer surplus
Consumer surplus is the extra satisfaction gained by consumers from paying a price lower than what they were willing to pay
16 of 19
Explain the concept of producer surplus
Producer surplus is the excess of actual earnings gained by producers for a given level of output, over and above what they would be prepared to accept for that level of output
17 of 19
Explain allocative efficiency
The best allocation of resources from society's point of view is at competitive market equilibrium, where community surplus (consumer+producer surpluses) is maximised, and the marginal benefit=marginal cost.
18 of 19
Explain price elasticity of demand (PED)
PED measures the responsiveness of quantity demanded of a good to a change in price.
19 of 19

## Other cards in this set

### Card 2

#### Front

Outline the law of demand

#### Back

That as the price of a good increases, the quantity demanded will decrease, ceteris paribus.

### Card 3

#### Front

Explain the function of a demand curve

### Card 4

#### Front

List the non-price determinants of demand

### Card 5

#### Front

Distinguish between movements along the demand curve and shifts of the demand curve