Free goods
Goods that do not command value within the market, they are abundant and a free gift of nature
Economic good
Goods which command value in the market as they are scarce goods, any good which has a price and is scarce commands value in the market
Factors that shift supply, (acronym)
PINTSWC
Productivity
Indirect taxes
Number of firms in the market
Technology
Subsidies
Weather
Cost of production
Factors that shift demand - PASIFIC
Population
Advertising
Substitutes
Income
Fashion and taste
Define Marginal Utility
Marginal utility is the additional utility or amount of satisfaction gained from each additional unit of consumption
Define Composite demand
Demand for a good that has multiple uses
Define Joint supply
Goods that are produced together
Define competitive supply
Goods in competitive supply are alternative products a firm could make with its factors of productions
Draw market disequilibrium shortage + surplus
Define consumer surplus
Consumer surplus is when the price that consumers pay for the product is less than the price they were willing and able to pay
Define producer surplus
Producer surplus is shown by the difference between the supply curve (the amount the produces are willing and able to sell for ) and the market equilibrium
Non rival
Means that consumption of a product by one person deos not prevent another person from also consuming that product, e.g tv programmes
Free rider problem
Individuals have a incentive to use goods without contributing towards the cost
Non excludable
Means that once a good is provided it is impossible to stop people from using it
Zero marginal cost
Once supplied, the marginal cost of supplying another individual is zero
Impact of Indirect tax diagram.
Impact of subsidies diagram.
Producer surplus definition
Producer surplus is the extra benefit producers gain from selling a product at a market price higher than the minimum price they were willing to accept
Factors that affect PED
SPLAT
Substitutes
Proportion of income
Luxury or Necessity
Addictive
Time
Positive XED shows?
A positive (+) cross elasticity of demand estimate indicates that the two goods are substitutes and in competitive demand, so as the price of one good rises so too does the demand for the other and vice versa.
Negative XED shows?
A negative (-) cross elasticity of demand estimates that the two goods are complements and are in joint demand, so as the price of one good rises the demand for the other one falls
PES Definition + Formula
Price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price.
PES = % Change in Quantity supplied
/ % Change in price
Factors that affect PES
PSSST
Production lag - Time to produce
Stock - Inventory amount?
Spare capacity - How much is available
Substitutability of Factors- Capital/Labour high?
Time- Long run
Market Economy definition
Market economy is where supply and demand is driven by consumer choices and competition, they determine what is produced, how much, with minimal government interference
