Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 
2.1
1
How do you participate in the following markets?
■ 
the fast food market.
■ 
the telecommunications market.
■ 
the transport market.
2
For each, say how important price is in your 
decisions to consume.
Equilibrium and eff iciency: 
Prices are set by markets, 
are always moving into and out of equilibrium, and can 
be both eff icient and ineff icient in diff erent ways and 
over diff erent time periods. This key concept is central 
to the content of this chapter and other microeconomic 
chapters. It recognises that equilibrium in a market 
depends upon both demand and supply influences, both 
of which can change over time.
KEY CONCEPT LINK
Demand
To an economist, 
demand
refers to the 
quantity of a product 
that purchasers are willing and able
to buy
at
various prices
per
period of time, 
all other things being equal.
Defi nitions are of critical importance in Economics, so 
let us break this defi nition down to understand in some 
depth what it means.
■ 
Quantity: This refers to the numerical quantity of a product 
that is being demanded.
■ 
Product: This is a general term that simply refers to the 
item that is being traded. It can be used for goods or 
services. We could also stretch this to include tradable items 
like money or other financial assets such as shares.
Demand: 
the quantity of a product that consumers are 
willing and able to buy at diff erent prices.
KEY TERM
39
Chapter 2: The price system and the microeconomy 

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■ 
Purchasers: These are the buyers of the product and 
are oft en referred to as ‘consumers’, although they may 
simply be intermediaries in the supply chain, e.g., Nestlé 
purchasing large amounts of cocoa to be used in the 
production of chocolate for sale to the final consumer. We 
can consider an individual’s demand for a product or, more 
usefully, we can aggregate this to look at the demand for 
the market as a whole.
■ 
Willing to buy: Purchasers must want a product if they 
are going to enter into the market with the intention of 
buying it.
■ 
Able to buy: To an economist, the 
notional demand
for a 
product, which emerges from wanting it, must be backed 
by purchasing power if the demand is to become an