Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics > 1.2.3-10 > Flashcards

1.2.3-10 Flashcards

(42 cards)

Start Studying
1
Q

What is Elasticity of demand?

A

An attempt to measure the responsiveness of quantity demanded to changes in other variables.
- IF elastic it is responsive if inelastic unresponsive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is Price elasticity of demand (PED)?

A
  • The responsiveness of demand to a change in the price of good
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Formula for PED?

A

%Change in quantity demanded/%change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is Unitary Elastic?

A

PED=1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is relatively elastic?

A

PED>1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is relatively inelastic?

A

PED<1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is perfectly elastic?

A

PED=infinity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is perfectly inelastic?

A

PED=0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the factors influencing PED?

A
  • Availability of substitutes
  • Time
  • Necessity
  • How large of a % total expenditure
  • Addictive
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Explain availability of substitutes which influence PED?

A
  • If there are a lot of substitutes e.g Pepsi and Coke. People will switch to other products when prices go up. Therefore PED will be elastic. If there are no substitutes it will be inelastic, people will have to buy if no alternatives
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Explain time factors influencing PED?

A

The more time the more the person will find an alternative of the product so more the elastic it is. In short time price is inelastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Explain necessity factors influencing PED?

A
  • If you need something it will be inelastic as you need to buy it even if price goes up
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Explain How large of a % of a total expenditure factors influencing PED?

A
  • If a good or service represents a small percentage of a persons spending, A significant increase in price will have a small impact on how much they buy so it will be inelastic
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Explain addictive factors influencing PED?

A
  • If a product is addictive the demand curve will be inelastic. No matter the price people will buy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Explain the significance of PED?

A
  • PED determines the imposition of indirect taxes and subsidies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What does a more elastic demand curve mean?

A
  • Lower the incidence of tax on consumer.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is YED?

Study These Flashcards
A
  • The responsiveness of demand to change an income
18
Q

Formula of YED?

Study These Flashcards
A

%change in quantity demanded/%change in income

19
Q

What is an inferior good?

Study These Flashcards
A

YED<0 A rise in income will lead to fall in demand for good. Tesco value goods are inferior

20
Q

What is a normal good?

Study These Flashcards
A

YED>0 A rise in income will lead to a rise in demand for good

21
Q

What is a luxuruy good?

Study These Flashcards
A

normal good when YED>1

22
Q

When does it mean it is elastic or inelastic?

Study These Flashcards
A

If integer is smaller than 1 the good is inelastic if bigger than 1 it is elastic

23
Q

What is the significance of YED?

Study These Flashcards
A
  • Important to know how their sales will be affected by changes in the income of the population. It’s important to know wether is likely to increase sales or not
24
Q

What is Cross Elasticity of demand (XED)?

Study These Flashcards
A
  • The responsiveness of demand for one product to change in price for another product
25
Formula for XED?
%change in quantity demanded for A/%Change in price of B
26
When are substitutes needed?
- XED>0 and increase in price of B will increase A
27
When are complementary goods needed?X
XED<0 increase of price B will increase A
28
When are unrelated goods needed?
- XED=0 a chage in price of B has no impact on A
29
What is the significance of XED?
- Firms need to be aware of competition and those producing complementary goods. They need to know how price changed by other firms will impact them
30
What is the definition of supply?
Supply is the quantity of a good or service that a producer is able and willing to supply at a given price during a given period of time.
31
What are the factors that influence supply /shift the supply curve? PINTSWC
P- Productivity. Higher productivity causes an outward shift in supply, because average costs for the firm fall. I- Indirect taxes. Inward shift in supply. N- Number of firms. The more firms there are, the larger the supply. T- Technology. More advanced the technology causes an outward shift in supply. S- Subsidies. Subsidies cause an outward shift in supply. W- Weather. This is particularly for agricultural produce. Favourable conditions will increase supply. C- Costs of production. If costs of production fall, the firm can afford to supply more. If costs rise, such as with higher wages, there will be an inward shift in supply.
32
What is joint supply?
This is when increasing the supply of one good causes an increase or decrease in the supply of another good. For example, producing more lamb will increase the supply of wool.
33
What is competitive supply?
Competitive supply is where the production of one good prevents the supply of another -e.g. If the farmer kills his cows, he can no longer produce the milk Therefore, the rise in the price of beef may cause a decrease in the supply of milk
34
What is price elasticity of supply
Measures the responsiveness of quantity supplied to to a change in price
35
What are the factors affecting PES? - TESSS
Time - This is because in the short run, at least one factor of production is fixed and in the long run, all FOP are variable. Ease of entry into the market Substitutes for factors of production - E.g. can capital Spare capacity - There needs to be spare factories of production to increase supply Stocks - Goods that can be stockpiled are usually more supply elastic e.g. CDs. Firms can release them onto the market. Perishable goods like apples cannot be stockpiled
36
What is the price mechanism?
The way demand and supply interact to produce an equilibrium price
37
What is market clearing price?
The price at which demand for a good by consumers is equal to the number of goods that can be produced at that price
38
What is consumer surplus?
The difference between what consumers pay and what they would have been prepared to pay
39
What is producer surplus?
The difference between what producers receive and what they would have been prepared to receive.
40
What are the two types of indirect tax (taxes on goods and services)
Specific unit taxes - taxes that are added per unit of output Ad valorem taxes - taxes that are added by value of the output
41
What is a subsidy?
A sum of money paid by the government to producers to encourage production.
42

Economics (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions