What are the two aspects of economies?
Microeconomics
Macroeconomics
What is microeconomics?
The study of the economic behaviour of individual consumers firms and industries
What is macro economics?
Considers aggregate behaviour and the study of the sum of individual economic decisions. In other words the workings of the economic as a whole.
What does individual demand represent?
The amount of consumers willing and able to purchase at a given price, e.g. effective demand
What does market demand show?
The total amount of effective demand from all the consumers in a market. It is aggregate.
What are the changes in the factors affecting demand?
Change the price
Changes in the conditions of demand
What do changes in price lead to?
Movements along the curve for most goods as price goes up demand goes down due to substitute an income effects
What do changes and in condition of demand lead to?
Needs to movements or shifts in the demand curve
What factors cause a shift in the demand curve?
Prices of other goods
Income
Taste/fashion
Other e.g. Population size credit terms.
What is supply?
Supply the amount that produces are willing and able to produce a given time
What are the factors affecting supply for a good?
Production cost
Indirect taxes
Production efficiencies
What is production costs affecting supply for good?
Raw material prices increase which shall shift supplied to the left but improving technology that reduces the production cost will shift the curve to the right
How does indirect taxes affect supply for good?
With an indirect tax, the cost of projections are raised directly because the cost must be paid on each unit of the good sold
How does production efficiencies affect apply for a good?
More efficient use of the factors of production will allow suppliers to produce more items at a lower cost
What is the equilibrium price set by?
The interaction of supply and demand
What happens if the price is higher than the equilibrium?
Access supply so producers drop prices to clear the surplus
What happens if price is lower than the equilibrium?
Cement so shortages force prices up
What do changes in supply and demand result in
Changes in supplies/demand result in new equilibrium price
What are examples of markets were competition will be reduced
Monopoly. One company controls all or nearly all of the market for a particular product or service and no major competitors.
Monopolistic competition. A business that has many different competitors but each offer and what differentiated product.
Oligopoly. The market is controlled by a small number of organisations.
What are barriers to entry?
Our factors that make it difficult for a new entrant to gain an initial foot hole in the market
What are examples of barriers to entry?
Economies of scale
Product differentiation
Capital costs
Other costs advantages
Distribution channels
Switching costs
