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Competitive markets and how they work
Description
economics (F581: Markets in action) Mind Map on Competitive markets and how they work, created by raid001 on 04/14/2013.
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economics
f581: markets in action
f581: markets in action
Mind Map by
raid001
, updated more than 1 year ago
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Created by
raid001
almost 12 years ago
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Resource summary
Competitive markets and how they work
Demand: the quantity of goods and services that consumers are willing and able to buy at a given price level
Non price determinants= Subsitutues/complements, Population, Income, Taste/preference, Expected future prices
Change in price determinants cause movement along demand curve
Change in NPD cause a shift in the demand curve
Consumer surplus: the diff between the pirce that consumers are willing to pay and the actual price paid
Supply: the quantity of a product that producers are willing and able to provide at a given price level over a period of time
Non price determinant=Subsides/tax, Cost of input, Expected future prices, No of firms, Technology
Change in NPD cause a shift in supply curve
Change in cost causes a movement along the curve
Producer surplus: the diff between the price a producer is willing to accept and the price that is actually paid
Market equilibrium: the level of output where supply = demand
changing demand and supply means that the position of equilibrium changes
Disequilibrium: demand and supply are not equal- eg surplus and shortage
Elasticity
price elasticity of demand:the responsiveness of a change in demand to a %change in price
%change in QD / %change in price
factors affecting: price, avalability, substitutes, income, time(to react)
income elasticitiy of demand:the responsiveness of demand to a %change in price
%change in QD / %change in income
positive=normal, negative=inferior, high positive=luxury
cross elasticity of demand:the responsiveness of demand for 1 product in relation to change in price of another
%change in demand for good a / %change in demand for good b
if positive=substitutes, if negative=complements
price elasticity of supply:responsiveness of producers of a particular good to change in price of another good
%change of QS / %change in price
factors affecting=amount of time, unused capacity, ability to store stocks
Allocative efficiency:where customer satisfaction is maximised and resources are best used to benefit customers
competitive markets dont always lead to allocative efficiency as there is often under/over supply in the market
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