PRICE DETERMINATION IN A COMPETITIVE MARKET
Section Content
THE DETERMINANTS OF THE DEMAND FOR GOODS AND SERVICES
- The factors which determine the demand for a good or service.
- A demand curve shows the relationship between price and quantity demanded. - The causes of shifts in the demand curve. THE DETERMINANTS OF THE SUPPLY FOR GOODS AND SERVICES
- The factors which determine the supply of a good or service.
- A supply curve shows the relationship between price and quantity supplied. - Understand higher prices imply higher profits and that this will provide the incentive to expand production. - The causes of shifts in the supply curve. THE DETERMINATION OF EQUILIBIRUM MARKET PRICES
- How the interaction of demand and supply determines equilibrium prices in a market economy.
- The difference between equilibrium and disequilibrium. - Why excess demand and excess supply lead to changes in price. THE INTERRELATIONSHIP BETWEEN MARKETS
- Changes in a particular market are likely to affect other markets.
- The implications of joint demand, demand for substitute goods, composite demand, derived demand and joint supply. ELASTICITIES
- Be able to calculate price, income and cross elasticities of demand.
- The relationship between income elasticity of demand and normal and inferior goods. - The relationship between cross elasticity of demand and substitute and complementary goods. - The relationships between price elasticity of demand and firms’ total revenue (total expenditure). - The factors that influence these elasticities of demand. - Be able to calculate price elasticity of supply. - The factors that influence price elasticity of supply. |
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