Supply and demand, market structures, and macroeconomic indicators tested on CFA Level 1 economics.
40 cards · basic cards · AI-written, checked twice. Edit anything.
- What does the law of demand state?
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As the price of a good decreases, the quantity demanded increases, and vice versa, holding other factors constant.- What does the law of supply state?
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As the price of a good increases, the quantity supplied increases, and vice versa, holding other factors constant.- Define price elasticity of demand.
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The percentage change in quantity demanded divided by the percentage change in price; measures sensitivity of demand to price changes.- Define price elasticity of supply.
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The percentage change in quantity supplied divided by the percentage change in price; measures sensitivity of supply to price changes.- What is income elasticity of demand?
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The percentage change in quantity demanded divided by the percentage change in income; measures how demand responds to income changes.- Define cross-price elasticity of demand.
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The percentage change in quantity demanded of good A divided by the percentage change in price of good B; measures how demand for one good responds to price changes in another.- What is a normal good?
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A good for which demand increases when consumer income increases, such as quality clothing or restaurant meals.- What is an inferior good?
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A good for which demand decreases when consumer income increases, such as budget fast food or second-hand clothing.- Define substitute goods.
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Goods that satisfy similar needs or desires; an increase in the price of one increases demand for the other.- Define complementary goods.
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Goods that are typically used together; an increase in the price of one decreases demand for the other.- What is market equilibrium?
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The point where quantity supplied equals quantity demanded at a given price, with no tendency for change.- Define a market shortage.
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A situation where quantity demanded exceeds quantity supplied at a given price, creating upward pressure on price.- Define a market surplus.
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A situation where quantity supplied exceeds quantity demanded at a given price, creating downward pressure on price.- What are barriers to entry?
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Obstacles that prevent new firms from entering a market, such as economies of scale, brand loyalty, high capital requirements, or patents.- What is a natural monopoly?
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An industry where a single firm can supply the market at lower cost than multiple competitors due to significant economies of scale.
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