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?
- 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?
- As the price of a good increases, the quantity supplied increases, and vice versa, holding other factors constant.
- Define price elasticity of demand.
- 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.
- 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?
- 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.
- 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?
- A good for which demand increases when consumer income increases, such as quality clothing or restaurant meals.
- What is an inferior good?
- A good for which demand decreases when consumer income increases, such as budget fast food or second-hand clothing.
- Define substitute goods.
- Goods that satisfy similar needs or desires; an increase in the price of one increases demand for the other.
- Define complementary goods.
- Goods that are typically used together; an increase in the price of one decreases demand for the other.
- What is market equilibrium?
- The point where quantity supplied equals quantity demanded at a given price, with no tendency for change.
- Define a market shortage.
- A situation where quantity demanded exceeds quantity supplied at a given price, creating upward pressure on price.
- Define a market surplus.
- A situation where quantity supplied exceeds quantity demanded at a given price, creating downward pressure on price.
- What are barriers to entry?
- 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?
- An industry where a single firm can supply the market at lower cost than multiple competitors due to significant economies of scale.