Commerce - Milestone 2

Question 1

What is elasticity

Answer 1

A measure of how responsive something is to a particular change

Question 2

What is PED

Answer 2

measures how responsive quantity demanded is to a change in price

Question 3

What is inelastic demand

Answer 3

When a percentage change in price results in a proportionally smaller percentage change in quantity demanded

Question 4

What is elastic demand

Answer 4

When a percentage change in price results in a proportionally larger percentage change in quantity demanded

Question 5

How to calculate PED

Answer 5

percentage change in quantity demanded over percentage change over price

Question 6

What is perfectly elastic PED

Answer 6

Demand is indefinitely responsive to price changes

Question 7

What is perfectly inelastic PED

Answer 7

Demand remains unchanged regardless of price changes

Question 8

What is PES

Answer 8

measures how responsive quantity supplied is to a change in price

Question 9

What is inelastic supply

Answer 9

When a percentage change in price results in a proportionally smaller percentage change in quantity supplied

Question 10

What is elastic supply

Answer 10

When a percentage change in price results in a proportionally larger percentage change in quantity supplied

Question 11

How to calculate PES

Answer 11

percentage change in quantity supplied over percentage change over price

Question 12

What is tax

Answer 12

a compulsory financial charge imposed by a government on individuals, businesses or goods and services to generate revenue for public expenditures

Question 13

What are some purposes of tax

Answer 13

provide revenue for the government
discourage the consumptiom
redistribute wealth from the rich to the poor
make foreign goods more expensive
protect the environment

Question 14

What is a subsidy

Answer 14

a payment from government to suppliers to encourage consumption, reduces the cost the production and shifts the supply curve to the right

Question 15

What is macroeconomics

Answer 15

the branch of economics that studies the behaviour and performance of the economy as a whole

Question 16

What is circular flow model

Answer 16

an economic diagram that shows how money, goods and services and resources move around an economy

Question 17

What are real flows

Answer 17

the flow od goods, services and resources

Question 18

What are money flows

Answer 18

the flow of money in exchange for goods, services and resources

Question 19

What are the factor incomes

Answer 19

land earns rent
labour earns wages
capital earns interest
enterprise earns profit

Question 20

What are transfer payments

Answer 20

payments made by the government to individuals or households without receiving any good or services in return

Question 21

What are injections

Answer 21

money entering the circular flow of income. This money increases spending in the economy and boosts economic activity

Question 22

What are withdrawals

Answer 22

money leaving the circular flow of income. This means the money is not being spent on goods and services in the economy and can reduce overall economic actvity

Question 23

What are the injections in the circular flow model

Answer 23

investments, government spending and exports

Question 24

What are the withdrawals in the circular flow model

Answer 24

savings, taxation, imports

Question 25

What is the PPC

Answer 25

The production possibility curve illustrates the maximum combinations that an economy can produce when all available resources and current technology are fully utilised

Question 26

What is aggregate demand

Answer 26

the total demand for all finished goods and services in an economy.

Question 27

How to calculate AD

Answer 27

C + I + G + (X - M)

Question 28

What is gross domestic product

Answer 28

GDP is the total value of all goods and services produced in a country in a year

Question 29

What are diminishing returns

Answer 29

As an economy shifts resources from producing wheat to producing machines, it must use resources less suited for manufacturing (like farm workers or farmland). These resources are less efficient at making machines, so each additional machine costs more in terms of lost wheat. Thus, the opportunity cost of producing machines increases as more are made.

Question 30

What is the law of diminishing returns

Answer 30

As more units of a variable input to a fixed input the additional output produced from each extra unit of input will eventually decrease, holding all else constant

Question 31

What is aggregate supply

Answer 31

the total supply of good and services produced in an economy at a given price level within a certain period

Question 32

What are causes for a decrease in AS

Answer 32

lower production costs new technology improving productivity discovering new resources lower business tax

Question 33

What are causes for an increase in AS

Answer 33

natural disaster increased business tax resource depletion higher input costs stricter government rules

Question 34

What are real values

Answer 34

Real values are adjusted for inflation so they reflect the true purchasing power of money

Question 35

What are nominal values

Answer 35

Nominal values are measured in current prices they do not account for inflation

Question 36

What is inflation

Answer 36

an increase in the general level of prices over a period of time

Question 37

What is disinflation

Answer 37

occurs when the rate of inflation is falling

Question 38

What is deflation

Answer 38

a decrease in the general price level over a period of time

Question 39

What is hyperinflation

Answer 39

occurs when the rate of inflation is over 100% per year

Question 40

What is demand-pull inflation

Answer 40

when demand for goods and services increases faster than the economy can produce them. This rising demand pulls prices up

Question 41

What is cost-push inflation

Answer 41

caused by higher prices for factors of production which are then passed onto the consumer as producers protect their profit margin

Question 42

What is imported inflation

Answer 42

happens when the price of goods and services we import from other countries increase causing overall prices to rise

Question 43

What is the consumer price index

Answer 43

the measure of inflation for NZ households

Question 44

What is unemployment

Answer 44

You are unemployed if you are 15 or older, have no paid employment, available to start work and are looking for a job or starting one in the next 4 weeks

Question 45

Economic costs of unemployment

Answer 45

Lower output Lower government tax Higher government spending on the benefit

Question 46

Social costs of unemployment

Answer 46

More crime and poverty Lower self-esteem