4.1.3 Flashcards
(30 cards)
define what a market means
interaction of buyers & sellers to determine the price of goods/services and the quantity purchased
describe trend of price (x) + quantity (y) graph demand curve
linear straight line
-ve relationship
as price decreases, quantity increases
what do consumers do in a market
demand
define price elasticity of demand
PED
how responsive demand is to a change in price
PED equation
% change in quantity demand / % change in price
what does expansion mean
decrease
what does shift mean
increase
how to calc % change
(diff. between 2 figures / first figure) x 100
PED : what does it mean when a change in price is responsive to a change in demand
elastic
OVER 1
PED : what does it mean when a change in price leads to a small change in demand
inelastic
UNDER 1
LIST 1 : why can the demand curve shift?
- population increase
- income increase
- increase in advertising
- seasonal changes
- price of substitute goes up
- price of complement goes down
- tax decrease
LIST 2 : which factors affect elasticity of demand?
- availability of substitutes
- time (can make demand more elastic)
- habit forming
- proportion of income spent
- brand loyalty
define income elasticity of demand
YED
how changes in income affect demand
what are +ve values over 0 called for YED
normal goods
what are -ve values under 0 called for YED
inferior goods
what are values past -1 or past 1 called for YED
elastic
what are values of 0 called for YED
inelastic
income elasticity of demand equation
YED
% change in quantity demanded / % change in income
define cross elasticity of demand
XED
how demand changes as other firms change their prices
cross elasticity of demand equation
XED
% change in quantity of A / % change in price of B
what are values at 0 called for XED
inelastic
what are values over called for XED
SUBSTITUTES
competitive demand
what are values over 1 called for XED
elastic
what are values under 0 called for XED
COMPLEMENTS
joint demand
