AS REVISION: Chapter Two

Market is where or when buyers and sellers meet to trade or exchange products.

Sub-market is a recognized or distinguishable part of a market. Also known as a market segment.

Demand is the quantity of a product that consumers are able and willing to purchase at various prices over a period of time.

National demand is the desire for a product.

Effective demand is the willingness and ability to buy a product.

Ceteris Paribus (Latin: other things being equal) is assuming that other variables remain unchanged.

Demand curve shows the relationship between the quantity demanded and the price of a product.

Demand schedule is the date that is used to draw the demand curve.

Movement along the demand curve happens in a response to a change in the price of a product.

Consumer surplus is the extra amount that a consumer is willing to pay for a product above the price that is actually paid.

Disposable income is the income after taxes on income have been deducted and state benefits have been added.

Real disposable income is the income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in the price level.

Normal goods are goods for which an increase in income leads to an increase in demand.

Inferior goods are goods for which an increase in income leads to a fall in demand.

Substitutes are competing goods.

Complements are goods for which there is joint demand.

Change in demand happens where a change in a non-price factor leads to an increase or decrease in demand for a product.

Supply is the quantity of a product that producers are willing and able to provide at different market prices over a period of time.

Profit is the difference between the total revenue of a producer and total cost.

Supply curve shows the relationship between the quantity supplied and the price of a product.

Supply schedule is the data used to draw up the supply curve of a product.

Producer surplus is the difference between the price a producer is willing to accept and what it is actually paid.

Change in supply occurs when a change in a non-price influence leads to an increase or decrease in the willingness of a producer to supply a product.

Price is the amount of money that is paid for a given amount of a particular good or service.

Equilibrium price is the price where demand and supply are equal.

Clearing price is the same as the equilibrium price.

Equilibrium quantity is the quantity that is demanded and supplied at the equilibrium price.

Disequilibrium is any position in the market where demand and supply are not equal.

Surplus is an excess of supply over demand.

Shortage is an excess of demand over supply.

Elasticity is the extent to which buyers and sellers respond to a change in the market conditions.

Price elasticity of demand is the responsiveness of the quantity demanded to a change in the price of the product.

Price elastic is where the percentage change in the quantity demanded is sensitive to a change in price.

Price inelasticity is where the percentage change in the quantity demanded is insensitive to a change in price.

Income elasticity of demand the responsiveness of demand to a change in income.

Normal goods are goods with a positive income elasticity of demand.

Income inelastic goods are goods for which a change in income produces a less than proportionate change in demand.

Income elastic goods are goods for which a change in income produces greater than proportionate change in demand.

Inferior goods are goods for which an increase in income leads to a fall in demand.

Cross elasticity of demand (XED) is the responsiveness of demand for one product in relation to a change in the price of another product.

Price elasticity of supply (PES) the responsiveness of the quantity supplied to a change in the price of the product.

Efficiency is where the best use of resources is made for the benefit of consumers.

Allocative efficiency is where consumer satisfaction is maximised.