Market and Market Types
What is a market?
A market is a place where buyers and sellers come together to exchange goods and services.
What is demand?
Demand is the quantity of a product consumers are willing to buy at a given price.
What happens to demand when price falls?
Demand increases.
What is supply?
Supply is the quantity of a product producers are willing to sell at a given price.
What is a normal good?
A good for which demand increases when income rises.
Give one example of a physical market
A supermarket
What is effective demand?
It is the willingness to buy backed by the ability to pay.
Why does the demand curve slope downwards?
Because lower prices lead to higher demand and higher prices lead to lower demand.
What happens to supply when price increases?
Supply increases because producers aim to make more profit.
What is an inferior good?
A good for which demand falls when income rises.
What is a factor market?
A market where factors of production (land, labour, capital) are bought and sold.
What assumption is made about consumer behaviour?
Consumers are rational and aim to maximise satisfaction (utility).
What is a substitute good?
A product that can replace another (e.g. Pepsi instead of Coke).
What is a supply curve?
A graph showing the relationship between price and quantity supplied.
What is a quota?
A legal limit on the quantity of goods that can be produced or sold.
What is a commodities market?
A market where raw materials like oil, wheat, or metals are traded.
What is the law of diminishing marginal utility?
Satisfaction gained from consuming a product decreases over time.
What is a complementary good?
A product used together with another (e.g. printers and ink cartridges).
What happens when production costs fall?
Supply increases (curve shifts to the right).
What is market equilibrium?
The price at which quantity demanded equals quantity supplied.