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Study sets matching "price determination"

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Study sets matching "price determination"

18 terms
Price determination
A measure of responsiveness between on…
Goods or services that are often bough…
A good or service that consumers might…
A measurement of the responsiveness of…
Elasticity
Complements
Substitutes
Price elasticity of demand
A measure of responsiveness between on…
Elasticity
Goods or services that are often bough…
Complements
8 terms
price determination
Price equilibrium
Excess supply
Excess demand
Do markets clear?
Where supply is demand (also known as market clearing price)
Where supply exceeds demand
Where demand exceeds supply
Free market forces lower prices when there is excess supply a…
Price equilibrium
Where supply is demand (also known as market clearing price)
Excess supply
Where supply exceeds demand
11 terms
Price Determination
Equilibrium
Consumer surplus
When PED is perfectly elastic
When PED is perfectly inelastic
Refers to the situation when there is no tendency for change
The difference between the amount that a consumer pays and th…
Consumer surplus is 0.
Consumer surplus is infinite
Equilibrium
Refers to the situation when there is no tendency for change
Consumer surplus
The difference between the amount that a consumer pays and th…
18 terms
Price Determination
The goal of the consumer in a market e…
The goal of the business firms in a ma…
Which of the following reasons why ind…
The four factors of production are:
The set of goods and services that maximizes their utility
Profits
They do not have the energy to produce all the goods and serv…
LLC & Entrepreneurship
The goal of the consumer in a market e…
The set of goods and services that maximizes their utility
The goal of the business firms in a ma…
Profits
11 terms
Price Determination
What is the principle behind price det…
What does equilibrium mean?
What does the state of equilibrium lac…
What does it imply for the market?
when demand and supply are used together to determine the equ…
where demand and supply curves cross... allows us to identify th…
shortages or surpluses as everything produced will be sold
everything will be sold
What is the principle behind price det…
when demand and supply are used together to determine the equ…
What does equilibrium mean?
where demand and supply curves cross... allows us to identify th…
10 terms
Price Determination (Chapter 4)
Market equilibrium
Comparative static analysis
Surplus
Shortage
The price at which the quantity demanded and the quantity sup…
Examines the before and after effect on equilibrium of a chan…
A situation where the quantity supplied is greater than the q…
A situation where the quantity demanded is greater that the q…
Market equilibrium
The price at which the quantity demanded and the quantity sup…
Comparative static analysis
Examines the before and after effect on equilibrium of a chan…
38 terms
Microeconomics 2 Price Determination
Competitive Market
Equilibrium Price
Supply
Demand
A market in which the large number of buyers and sellers poss…
The price at which planned demand for a good or service exact…
The quantity of a good or service that firms are willing and…
The quantity of a good or service that consumers are willing…
Competitive Market
A market in which the large number of buyers and sellers poss…
Equilibrium Price
The price at which planned demand for a good or service exact…
6 terms
Unit 7 Price Determination
Equilibrium Price
Excess Demand
Excess Supply
Free Market Forces
The price at which there is no tendency to change because pla…
Where demand is greater than supply.
Where supply is greater than demand.
Forces in free markets which act to reduce prices when there…
Equilibrium Price
The price at which there is no tendency to change because pla…
Excess Demand
Where demand is greater than supply.
33 terms
Micro- Price Determination
Market
Competitve market
Price mechanism
Signalling function
Voluntary meeting of buyers and sellers, both buyers and sell…
Market in which the large number of buyers and sellers posses…
Means by which the decisions of buyers and sellers interact t…
Prices give information to buyers and sellers to make their m…
Market
Voluntary meeting of buyers and sellers, both buyers and sell…
Competitve market
Market in which the large number of buyers and sellers posses…
3. price determination
Markets
Latent Demand
Effective Demand
Law of Demand
any medium through which sellers and buyers can negotiate a s…
A situation when consumers would like to buy a good or servic…
the desire for a good or service backed by an ability to pay
A law that states there is an inverse relationship between pr…
Markets
any medium through which sellers and buyers can negotiate a s…
Latent Demand
A situation when consumers would like to buy a good or servic…
9 terms
ABUS 101 Price Determination
market
demand
ceteris parabis
quantity demanded
interaction of potential buyers and potential sellers
quantities of a good buyers are willing and able to purchase…
"everything being equal"
refers to how much of a good or service will be purchased at…
market
interaction of potential buyers and potential sellers
demand
quantities of a good buyers are willing and able to purchase…
38 terms
Ch. 4 Price Determination
Market Clearing
Flow Commodities
Production Lag
Psychological Lag
process of the market price adjusting so that all buyers and…
commodities produced daily rather than in a seasonal harvest
period it takes to increase or decrease production
time period of high or low prices before producers adjust pro…
Market Clearing
process of the market price adjusting so that all buyers and…
Flow Commodities
commodities produced daily rather than in a seasonal harvest
7 terms
Economics04- Price determination
Market Equilibrium
Comparative static analysis
Consumer Surplus
Marginal Social benefit
Situation when the price is where quantity demanded is exactl…
Examines the effect on equilibrium of a change in external co…
Difference between the highest price a consumer would pay for…
Additional benefit that social gains from consuming an extra…
Market Equilibrium
Situation when the price is where quantity demanded is exactl…
Comparative static analysis
Examines the effect on equilibrium of a change in external co…
25 terms
Microeconomics Price Determination Definitions
Competing Supply
Complementary Good
Composite Demand
Condition of Demand
Where raw materials are used to produce one good they cannot…
A good in joint demand or a good which is demanded at the sam…
Demand for a good which has more than one use
A determinant of demand, over than the good's own price that…
Competing Supply
Where raw materials are used to produce one good they cannot…
Complementary Good
A good in joint demand or a good which is demanded at the sam…
22 terms
Micro - price determination
Where buyers and sellers come together…
You move along the curve if theres a p…
The total market demand from all indiv…
Subsidies, taxes,technology changes
What is market?
Difference between shifting the demand curve and moving along…
Whats horizontal summing?
What effects supply?
Where buyers and sellers come together…
What is market?
You move along the curve if theres a p…
Difference between shifting the demand curve and moving along…
25 terms
National income and price determination
Marginal propensity to consume
Marginal propensity to save
MPC=
MPS=
The fraction of additional disposable income that consumers s…
The fraction of additional disposable income
Change in consumer spending / change in income
Change in saving / change in income
Marginal propensity to consume
The fraction of additional disposable income that consumers s…
Marginal propensity to save
The fraction of additional disposable income
17 terms
Price Determination in Competitive Markets
Demand
Determinants of Demand
Price Elasticity of Demand (PED)
Income Elasticity of Demand (YED)
...
...
...
...
Demand
...
Determinants of Demand
...
25 terms
Supply, Demand, Price Determination
Price Ceiling
Price Floor
Equilibrium
Equilibrium Price
A set max price. (always below the equilibrium price to be ef…
A set min price. (always above the equilibrium price to be ef…
quantity demanded = quantity supplied
Price that "clears the market" because it does not leave a sh…
Price Ceiling
A set max price. (always below the equilibrium price to be ef…
Price Floor
A set min price. (always above the equilibrium price to be ef…
14 terms
Price Determination Theories
Marx
dialectic
materialism
class struggle
dialectic, materialism, class struggle, act of exploitation
a historical process (history progresses through a these v. a…
material productive forces
motor that propels the dialectic forward
Marx
dialectic, materialism, class struggle, act of exploitation
dialectic
a historical process (history progresses through a these v. a…
National Income and Price Determination
aggregate demand
aggregate supply
consumption schedule
saving schedule
The amount of goods and services in the economy that will be…
The aggregate supply curve shows the relationship between the…
a schedule showing the amounts households plan to spend for c…
A schedule that shows the amounts households plan to save (pl…
aggregate demand
The amount of goods and services in the economy that will be…
aggregate supply
The aggregate supply curve shows the relationship between the…
22 terms
Supply, Demand, Price Determination
Supply
Law of SUPPLY
PRICE and QUANTITY SUPPLIED have a ___…
a SUPPLY curve has a ________________…
the willingness and ability of producers to offer and sell go…
as a price of a good or service increases, the quantity suppl…
direct
positive
Supply
the willingness and ability of producers to offer and sell go…
Law of SUPPLY
as a price of a good or service increases, the quantity suppl…
25 terms
National Income and Price Determination
Average Propensity to consume
Average Propensity to save
Marginal propensity to consume
Marginal propensity to save
fraction or percentage of disposable income that households p…
fraction or percentage of disposable income that households s…
the fraction of any change in disposable income spent for con…
the fraction of any change in disposable income that househol…
Average Propensity to consume
fraction or percentage of disposable income that households p…
Average Propensity to save
fraction or percentage of disposable income that households s…
9 terms
Competition, PED and Price Determination
USPs
Price Elasticity of Demand
Price Inelastic
Competitive Pricing
Unique Selling Points. Distinctive features that no competing…
Measures the responsiveness of demand to a change in price
A large change in price results in a small change in quantity…
Pricing goods at a level at or below that of rivals
USPs
Unique Selling Points. Distinctive features that no competing…
Price Elasticity of Demand
Measures the responsiveness of demand to a change in price
54 terms
National Income and Price Determination
The nominal wage is the...
According to the aggregate demand curv…
If your disposable income increases fr…
Changes in the short run aggregate sup…
Dollar amount of the wage paid
rises; output demanded falls
0.6 (consumption/disposable income)
wages
The nominal wage is the...
Dollar amount of the wage paid
According to the aggregate demand curv…
rises; output demanded falls
16 terms
price determination in markets
the market demand curve
the market supply curve
equilibrium price of a good is
at the equilibrium price there is
shows the amount demanded at every price
shows the amount supplied at every price
a price at which quantity supplied equals quantity demanded.…
no net tendency for price to change.
the market demand curve
shows the amount demanded at every price
the market supply curve
shows the amount supplied at every price
27 terms
Macroeconomic Price Determination Test
What is the economic problem?
How does the US try to solve the probl…
Why doesn't chaos result from the US p…
Markets develop where?
scarcity
emphasis on freedom of choice
choices must be agreeable to both parties involved in a trade
buyers and sellers come together
What is the economic problem?
scarcity
How does the US try to solve the probl…
emphasis on freedom of choice
8 terms
Price Determination Economics
Equilibrium Price is also known as what?
Equilibrium Price
When is quantity demanded equal to the…
What three functions does price have?
Market Clearing Price
The price at which goods and services may actually be bought…
Equilibrium Price
Sends signals to producers and consumers, acts as an incentiv…
Equilibrium Price is also known as what?
Market Clearing Price
Equilibrium Price
The price at which goods and services may actually be bought…
28 terms
Supply, Demand and Price Determination
Demand
Marginal Utility
"Increase in the Quantity Supplied"
"Decrease in the Quantity Supplied"
The entire relationship between each possible price of a good…
the additional utility gained from consuming one additional u…
This happens ONLY when there is an increase in the selling pr…
This happens ONLY when there is a decrease in the selling pri…
Demand
The entire relationship between each possible price of a good…
Marginal Utility
the additional utility gained from consuming one additional u…
14 terms
Determination of Price in competitive markets
Equilibrium price
How competition affects price
Tax
Specific tax (parallel shift up)
the single price where the quantity demanded and the quantity…
When firms are competing with other firms, there is downward…
a compulsory payment to the government,Causes a decrease (shi…
a tax placed which is a fixed amount of money per unit bought
Equilibrium price
the single price where the quantity demanded and the quantity…
How competition affects price
When firms are competing with other firms, there is downward…
6 terms
The determination of equilibrium market prices
Equilibrium
Disequilibrium
Market equilibrium
Market disequilibrium
A state of rest or balance between opposing forces.
A situation in a market when there is excess supply or excess…
A market is in equilibrium when planned demand equals planned…
Exists at any price other than the equilibrium price. When th…
Equilibrium
A state of rest or balance between opposing forces.
Disequilibrium
A situation in a market when there is excess supply or excess…
25 terms
Models of Price Determination in Duopoly
Identify 4 models of price determinati…
Does the Bertrand model use a zero con…
What are the 2 assumptions regarding o…
At what level does a firm have no ince…
1. Bertrand Model... 2. Edgeworth Model... 3. Kinked Demand Curve... 4…
Yes
1. Output is identical... 2. There are are no transaction costs
When P = MC
Identify 4 models of price determinati…
1. Bertrand Model... 2. Edgeworth Model... 3. Kinked Demand Curve... 4…
Does the Bertrand model use a zero con…
Yes
52 terms
Determination of Output and Price Levels
What are the characteristics of a boom?
What are the characteristics of a down…
What are the characteristics of a trou…
What are the characteristics of an upt…
•High levels of economic activity.... •High levels of investment…
•Reduction in consumer and business spending.... •Confidence fal…
•May lead to recession (2 consecutive quarters of negative ec…
•Improved business and consumer confidence.... •Spending starts…
What are the characteristics of a boom?
•High levels of economic activity.... •High levels of investment…
What are the characteristics of a down…
•Reduction in consumer and business spending.... •Confidence fal…
30 terms
Price determination in a competitive market
Competitive Market
Equilibrium Price
Supply
Demand
A market in which large numbers of both buyers and sellers po…
The price at which planned demand for a good/service exactly…
The quantity of a good/service that a firm is willing and cap…
The quantity of a good/service that consumers are willing/cap…
Competitive Market
A market in which large numbers of both buyers and sellers po…
Equilibrium Price
The price at which planned demand for a good/service exactly…
16 terms
Price determination in a competitive market
Competitive market
Equilibrium price
Supply
Demand
A market in which the large number of buyers and sellers poss…
The price at which planned demand for a good or service exact…
The quantity of a good or service that firms are willing and…
The quantity of a good or service that consumers are willing…
Competitive market
A market in which the large number of buyers and sellers poss…
Equilibrium price
The price at which planned demand for a good or service exact…
What determines Price Elasticity?
Elasticity of demand
Substitutes
Necessity vs. Luxury
Specific brands
how responsive the quantity demanded (Qd) is to a change in p…
Price elasticity is higher when close substitutes are availab…
Price elasticity is higher for luxuries than for necessities.
Price elasticity is higher for narrowly defined goods than fo…
Elasticity of demand
how responsive the quantity demanded (Qd) is to a change in p…
Substitutes
Price elasticity is higher when close substitutes are availab…
9 terms
Non-price determinants of supply
changes in costs of factors of product…
changes in technology
prices of related goods: competitive s…
prices of related goods: joint supply
as the cost of factors of production increases, supply decrea…
new good technology introduced, supply increases
costs of A increases, quantity supplied for B decreases
increase in price of one, increase in quantity supplied of an…
changes in costs of factors of product…
as the cost of factors of production increases, supply decrea…
changes in technology
new good technology introduced, supply increases
6 terms
Non-Price Determinants of Demand
Tastes
Other related goods' prices
Expectations
Incomes
A change in consumers' tastes and preferences
A change in the price of substitutes and complementary goods
The expectations among consumers of the future prices of a go…
A change in consumers' incomes
Tastes
A change in consumers' tastes and preferences
Other related goods' prices
A change in the price of substitutes and complementary goods
9 terms
Determinants of price elasticity of demand
Substitution
Income
Necessity
Habits, addictions, fashion and tastes
.
.
.
.
Substitution
.
Income
.
12 terms
Non-Price Determinants
Number of Producers
Technology
Price of Inputs
Natural Occurrences
As the amount of companies that produce a certain good/servic…
As technology innovations increases, supply increases
If the price of the materials (including labour) increases, s…
Bad occurrences (any bad incident) decreases supply... Good occu…
Number of Producers
As the amount of companies that produce a certain good/servic…
Technology
As technology innovations increases, supply increases
8 terms
Non-price determinants
I
C
I
P
Interest rates
Price of complementary goods
Income of consumers
Population size and structure
I
Interest rates
C
Price of complementary goods
15 terms
Econ Non-Price Determinants
Price of Related Products (Demand)
Substitutes (Demand)
Complementary Goods (Demand)
Consumer Income (Demand)
goods which can replace other goods; goods used together
if butter becomes more expensive, people will switch to marga…
goods used together; camera and film - if film becomes cheap…
income can increase due to pay raise or tax cut, causes peopl…
Price of Related Products (Demand)
goods which can replace other goods; goods used together
Substitutes (Demand)
if butter becomes more expensive, people will switch to marga…
The determination of equilibrium market prices
Equilibrium
Disequilibrium
Market equilibrium
Market disequilibrium
A state of rest or balance between opposing forces.
A situation in a market when there is excess supply or excess…
A market is in equilibrium when planned demand equals planned…
Exists at any price other than the equilibrium price. When th…
Equilibrium
A state of rest or balance between opposing forces.
Disequilibrium
A situation in a market when there is excess supply or excess…
6 terms
The determination of equilibrium market prices
equilibrium
disequilibrium
market equilibrium
market disequilibrium
a state of rest or balance between opposing forces
a situation in a market where there is excess supply or exces…
planned demand = planned supply... demand curve crosses supply c…
exists at any price other than the equilibrium price... excess d…
equilibrium
a state of rest or balance between opposing forces
disequilibrium
a situation in a market where there is excess supply or exces…
7 terms
Non price Determinants of Demand
Taste
Market size
Normal Goods
Inferior Goods
As consumers' preferences shift between different types of go…
If the number of consumers increase, demand for a good will i…
As consumers' income rises, demand increases. s incomes fall,…
If consumers demand more of a good as incomes fall, and less…
Taste
As consumers' preferences shift between different types of go…
Market size
If the number of consumers increase, demand for a good will i…
7 terms
determinants of price elasticity of supply
time
shorter time period will mean
mobility of factors or production
unused capacity
PES is measured over a certain period of time
the less elastic the supply is
whether or no it is easy to change the factors of production…
if not all of the firm's resources are being fully used then…
time
PES is measured over a certain period of time
shorter time period will mean
the less elastic the supply is
24 terms
2.1 Price determinants
When does a movement along a demand cu…
Competitive markets
What does a fall in price lead to?
What is a contraction of demand?
When the goods price changes
A market in which the large number of buyers and sellers poss…
More of the good is demanded. This is known as extension of d…
Occurs when a rise in price leads to less being demanded.
When does a movement along a demand cu…
When the goods price changes
Competitive markets
A market in which the large number of buyers and sellers poss…
10 terms
Determining Market Price
Both excess supply and excess demand a…
A car dealer who does not have enough…
On a graph, an equilibrium point is wh…
A limited amount of goods available me…
disequilibrium.
disequilibrium.
a supply curve and a demand curve meet.
demand
Both excess supply and excess demand a…
disequilibrium.
A car dealer who does not have enough…
disequilibrium.
5 terms
Determinants of price elasticity of demand
Availability of close substitutes:
Necessities versus luxuries:
Budget share:
Definition of the markets:
the more substitutes a good has, the more elastic the demand.
demand for necessities is more inelastic.
demand for big- ticket items tend to be more elastic.
narrowly defined markets have more elastic demand than broadl…
Availability of close substitutes:
the more substitutes a good has, the more elastic the demand.
Necessities versus luxuries:
demand for necessities is more inelastic.
9 terms
Determining Market Price
coordinate
equilibrium
excess demand
excess supply
to work together to meet a goal
the point where supply and demand meet and prices are set
when the quantity demanded, at a given price, is higher then…
when the quantity supplied, at a given price, is higher then…
coordinate
to work together to meet a goal
equilibrium
the point where supply and demand meet and prices are set
6 terms
Determinants of price elasticity of supply
Level of spare capacity
State of the economy
Level of stocks of finished goods in a…
Perishability of the product
A high level of spare capacity in a firm means that it can ra…
In a recession there are many unemployed resources and so the…
A high level of stocks means that the firm can increase suppl…
Some goods cannot be stockpiled and are higly perishable e.g…
Level of spare capacity
A high level of spare capacity in a firm means that it can ra…
State of the economy
In a recession there are many unemployed resources and so the…
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