Demand — definition?
Quantity consumers are willing to buy at a price.
Elasticity — role?
Measures responsiveness of Q to P or income.
Price elasticity of demand — mechanism?
Ratio of % change in QD to % change in P.
Demand — definition?
Quantity consumers are willing to buy at various prices.
Supply — definition?
Quantity producers are willing to sell at various prices.
Elastic demand — PED?
PED > 1; QD responds strongly to price changes.
Inelastic demand — PED?
PED < 1; QD less responsive to price.
Market equilibrium — meaning?
Where demand equals supply.
Normal goods — demand?
Increase with higher income.
Perfectly elastic — PED?
PED approaches infinity; QD drops to zero.
Answer 9 questions on Understanding Microeconomic Market Dynamics.
1. What happens to the market price when demand exceeds supply?
2. If the price elasticity of demand (PED) for a product is greater than 1, what does this indicate?
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