Market forces
Definition: how much consumers are able and willing to buy a good or service in a given time
Demand
12.5%
Refers to the responsiveness of demand to a change in the price
PED
Refers to goods that may replace each other because they have similar funcitons
Substitutes
A fall in production cost will cause
An increase in supply
How much producers are able and willing to sell a good in a given time
Supply
If the price for a good were 20, then it fell to 18, what is the percentage change in price?
-10%
Refers to the responsiveness of supply in response to a change in price
PES
How will the demand for rice in dongguan change if more people move to dongguan
Demand increase (shifts right)
Improved technology typically
Increases supply
Refers to a situation when the quantity supplied is greater than the quantity demanded
Excess supply
If incomes in Dongguan rose by 1.8% and this caused a 2% decrease in the demand for a good, what is the YED for that good?
-1.11
Refers to the responsiveness of demand in response to a change in income
YED
An increase in demand will cause what change to price and quantity
Price increase, Quantity increase
Supply for agricultural products tends to be more
Inelastic
What will happen to the market price if there is excess demand
Price will increase
If the price of a good fell by 20% and the demand as a result rose by 30%, what is the PED for that good?
-1.5
It is greater than 1
Demand will increase for an inferior good if
Incomes fall
Supply cannot increase much if there is no
Spare capacity
What do we call the price at which quantity demanded equals quantity supplied
Market equilibrium price
If the Ped for a good is -0.8 and the price of that good rose by 15%, how much will the quantity demanded change as a result?
-12%
A good is a normal good if
It's YED is greater than 0 (or its demand increases as income rises)
If the price of a complement increases, the demand for the other good will
Fall (shift left)
If a good is difficult to store cheaply then it will be
Inelastic