Chapters 7 - 12 chug

Question 1

Demand

Answer 1

Willingness and ability to buy a product

Question 2

Demand’s relation to price

Answer 2

As price increases demand decreases

Question 3

Individual demand

Answer 3

Amount that a consumer is willing to buy at different prices

Question 4

Market demand

Answer 4

Total demand for product at different prices

Question 5

Aggregation

Answer 5

Totaling up of demand

Question 6

Demand schedule

Answer 6

Displays different quantities demanded at different prices

Question 7

Demand curve

Answer 7

Diagram displaying the change in quantity demanded over a change in price

Question 8

Movements along a curve

Answer 8

Extension: quantity increases
Contraction: quantity decreases

Question 9

Factors that cause a shift in demand

Answer 9

Change in income
Change in price of related products
Advertising campaigns
Population (age composition, size)
Trends

Question 10

Normal good

Answer 10

A product that’s demand increases when income increase

Question 11

Inferior good

Answer 11

A product that’s demand decreases when income increase

Question 12

Substitute

Answer 12

A product that can replace another

Question 13

Supply

Answer 13

Willingness and ability to buy a product

Question 14

Supply’s relation to price

Answer 14

As price increases demand increases

Question 15

Individual supply

Answer 15

Supply of one firm

Question 16

Market supply

Answer 16

Total supply for a product in an industry

Question 17

Supply schedule

Answer 17

Displays different quantities supplied at different prices

Question 18

Supply curve

Answer 18

Diagram displaying the change in quantity supplied over a change in price

Question 19

Factors that cause a shift in supply

Answer 19

Costs of production
Technology
Taxes
Subsidies
Natural factors (Weather, health, livestock)
Prices of other products
Disasters and war
Discoveries and depletion of commodities

Question 20

Equilibrium price

Answer 20

Price where demand and supply are equal

Question 21

Disequilibrium

Answer 21

A state where demand and supply are not equal

Question 22

Surplus

Answer 22

Supply is greater than demand

Question 23

Shortage

Answer 23

Demand is greater than supply

Question 24

Cause of shift in a D&S diagram

Answer 24

Movement in the other market force and a change in price

Question 25

PED

Answer 25

Percentage change in demand over Percentage change in price (How responsive demand is to a change in price)

Question 26

Calculating PED

Answer 26

((Change in demand/original quantity demanded) *100) / ((Change in price/original price) *100)

Question 27

Elastic

Answer 27

Quantity changes by a greater proportion when there is a change in price

Question 28

Inelastic

Answer 28

Quantity changes by a smaller proportion when there is a change in price

Question 29

Factors for elasticity of demand

Answer 29

Availability of substitutes Loyalty Addictiveness Necessity Proportion of income taken Ease of switching Time

Question 30

Perfectly elastic demand

Answer 30

When a change in price causes a complete change in quantity demanded

Question 31

Perfectly inelastic demand

Answer 31

When quantity demanded does not change due to a change in price

Question 32

Unit elasticity of demand

Answer 32

When a percentage change in price results in an equal percentage change in quantity demanded giving a PED of 1

Question 33

Increase in price when inelastic

Answer 33

Increased revenue

Question 34

Increase in price when elastic

Answer 34

Loss revenue

Question 35

Changes in PED

Answer 35

PED becomes more elastic as price increases A shift to the right causes more inelastic curve vice versa

Question 36

PES

Answer 36

Percentage change in quantity supplied over a percentage change in price

Question 37

Calculating PES

Answer 37

((Change in supplied/original quantity supplied) *100) / ((Change in price/original price) *100)

Question 38

Factors of elasticity in supply

Answer 38

Time to produce Cost of altering its supply Storage capability

Question 39

Perfectly inelastic supply

Answer 39

When quantity supplied does not change to a change in price

Question 40

Perfectly elastic supply

Answer 40

A change in price causes an infinite change in supply

Question 41

Unit PES

Answer 41

When the percentage change in price is equal to the change in supply

Question 42

Changes in PES

Answer 42

Over time becomes more elastic Advances in technology makes product more elastic

Question 43

Implications of PED and PES

Answer 43

Consumers benefit form elastic PED (Producers won't drop prices due to lost revenue) and elastic PES (No large increase in price after demand increases) Producers benefit from inelastic PED (higher prices and profit) and elastic PES (higher profits) Governments want elastic PED (can discourage demerit goods by raising price of them ) and elastic PES (can subsidies the production of merit goods)