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IGCSEEconomicsCambridge (CIE)Flashcards2. The Allocation of Resources2.6 Price Changes

2.6 Price Changes (Cambridge (CIE) IGCSE Economics)

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  • What are dynamic markets?

    Dynamic markets are real world markets that are constantly changing.

  • Define the term disequilibrium.

    Disequilibrium occurs when there is excess demand or excess supply in a market.

  • How do market forces respond to disequilibrium?

    Market forces seek to clear excess demand or supply.

  • What causes an increase in demand?

    An increase in demand is caused by a change in the conditions of demand.

  • Define the term excess demand.

    Excess demand occurs when the quantity demanded exceeds the quantity supplied at the current price.

  • State the meaning of the term supply shock.

    A supply shock is an unexpected event that changes the supply of a good or service, such as the 2011 tsunami in Japan, which created a global supply shock.

  • What is the impact of inflation on demand?

    Inflation lowers real income, reducing the demand for normal goods and services.

  • What is the aim of a subsidy?

    A subsidy is a payment from the government to the producer with the aim of increasing the supply of a good or service.

  • True or False?

    An increase in supply lowers the equilibrium price.

    True.

    An increase in supply lowers the equilibrium price.

  • How do markets respond to excess demand?

    Sellers usually raise prices in response to excess demand.

  • What is the market's response to excess supply?

    Excess supply usually causes sellers to lower prices.

Previous:2.5 Price DeterminationNext:2.7 Price Elasticity of Demand (PED)

    1. Topic 1

      1.1 The Nature of the Economic Problem

    2. Topic 2

      1.2 The Factors of Production

    3. Topic 3

      1.3 Opportunity Cost

    4. Topic 4

      1.4 Production Possibility Curves

    1. Topic 1

      2.1 Microeconomics & Macroeconomics

    2. Topic 2

      2.2 The Role of Markets in Allocating Resources

    3. Topic 3

      2.3 Demand

    4. Topic 4

      2.4 Supply

    5. Topic 5

      2.5 Price Determination

    6. Topic 6

      2.6 Price Changes

    7. Topic 7

      2.7 Price Elasticity of Demand (PED)

    8. Topic 8

      2.8 Price Elasticity of Supply (PES)

    9. Topic 9

      2.9 Market Economic System

    10. Topic 10

      2.10 Market Failure

    11. Topic 11

      2.11 Mixed Economic System

    1. Topic 1

      3.1 Money & Banking

    2. Topic 2

      3.2 Households

    3. Topic 3

      3.3. Workers

    4. Topic 4

      3.4 Trade Unions

    5. Topic 5

      3.5 Firms

    6. Topic 6

      3.6 Firms & Production

    7. Topic 7

      3.7 Firms’ Costs, Revenue & Objectives

    8. Topic 8

      3.8 Market Structure

    1. Topic 1

      4.1 The Role of Government

    2. Topic 2

      4.2 The Macroeconomic Aims of Government

    3. Topic 3

      4.3 Fiscal Policy

    4. Topic 4

      4.4 Monetary Policy

    5. Topic 5

      4.5 Supply-side Policy

    6. Topic 6

      4.6 Economic Growth

    7. Topic 7

      4.7 Employment & Unemployment

    8. Topic 8

      4.8 Inflation & Deflation

    1. Topic 1

      5.1 Living Standards

    2. Topic 2

      5.2 Poverty

    3. Topic 3

      5.3 Population

    4. Topic 4

      5.4 Differences in Economic Development

    1. Topic 1

      6.1 International Specialisation

    2. Topic 2

      6.2 Globalisation, Free Trade & Protection

    3. Topic 3

      6.3 Foreign Exchange Rates

    4. Topic 4

      6.4 Current Account of Balance of Payments