D & S In product markets (12)

Question 1

What is a complement

Answer 1

Complementary goods are products which are used together.

Question 2

What is consumer surplus

Answer 2

The difference between how much buyers are willing to pay for a good and what they actually pay.

Question 3

What is cross elasticity

Answer 3

A measure of the responsiveness of quantity demanded of one good to a change in price of another good

Question 4

What is a inferior good

Answer 4

When demand for a product falls as real income increases

Question 5

What is a normal good

Answer 5

A good where demand increases when income increases

Question 6

What is price elasticity of demand

Answer 6

A measure of the responsiveness of quantity demand to a change in price

Question 7

What is price elasticity of supply

Answer 7

A measure of the responsiveness of quantity supplied to a change in price

Question 8

What is producer surplus

Answer 8

The difference between the market price which firms receive and the price at which they are prepared to supply

Question 9

What is a substitute

Answer 9

Substitutes are goods that perform the same function/satisfy the same need.

Question 10

What is a luxury good

Answer 10

When demand increases more than income increases

Question 11

What is a necessity

Answer 11

something needed for basic human existence, e.g. food, water, housing, electricity.

Question 12

What is a product market

Answer 12

A product market is the marketplace where final goods or services are sold to businesses and the public sector.

Question 13

Who are the economic agents

Answer 13

Consumer, Producer & Government

Question 14

Objectives of consumer

Answer 14

Consumers aim to generate the greatest utility possible from an economic decision.

Question 15

Objectives of producer

Answer 15

Producers aim to generate the highest profits, sales and revenue.

Question 16

Objectives of government

Answer 16

Economic welfare

Question 17

What is marginal utility

Answer 17

is the change in total utility or satisfaction derived from consuming an extra good or service.

Question 18

How does derived marginal utility affect demand curve

Answer 18

If there are diminishing marginal returns, then peoples willingness to pay will decline, therefore fall in demand curve

Question 19

Factors influencing demand

Answer 19

Price

Prices of substitutes and complements

Incomes

Fashion and trend

Structure of population

Advertising

Expectation of consumer

Question 20

Factors influencing supply

Answer 20

Price consumers willing to pay

Technology

Seller expectations

Natural events

Cost of production

Question 21

Why does the demand curve from top left to bottom right

Answer 21

Real Balance effect - As price level rises, the real value of peoples income falls so consumers are less able to buy the items they want or need.

Interest rate effect - If the price levels rises, this causes inflation and an increase in the demand for money and so a possible rise in interest rates with a deflationary effect on the economy.

Question 22

When is there movement along the demand line

Answer 22

There is a movement along the demand curve when the quantity wanted of a single commodity changes due to a change in price, while all other factors remain constant

Question 23

When does the demand curve shift

Answer 23

at each possible price due to a change in one or more other factors.

Question 24

Where is consumer surplus on a diagram

Answer 24

Above producer surplus

Question 25

Where is producer surplus on a diagram

Answer 25

Below consumer surplus

Question 26

What is the equation for price elasticity of demand

Answer 26

PED = % change in Q.D. / % change in Price.

Question 27

What is the equation for Income elasticity

Answer 27

YED = % change in Q.D / % change in Income.

Question 28

How do you find the percentage change

Answer 28

Divide the change by the original amount x 100

Question 29

What is the equation for cross elasticity

Answer 29

XED = % change in Q.D good A / % change in price of good B

Question 30

What is the equation for price elasticity of supply

Answer 30

PES = % change in Q.S. / % change in Price.

Question 31

What happens when a good is elastic

Answer 31

when price increases/decreases, demand will fall/rise by more than the price increased/decreased

Question 32

What happens when a good is inelastic

Answer 32

when the price goes down or up consumers’ buying habits also remain unchanged

Question 33

How does the government use elasticity

Answer 33

When government taxes goods with inelastic demand, the change in quantity demanded will be smaller than if government taxed an elastic good (more efficient).

Question 34

How does elasticity affect subsidys

Answer 34

If demand is elastic, then a subsidy causes a bigger percentage rise in demand. There is only a small fall in price, if inelastic then a subsidy causes a substantial fall in price, however there is only a small increase in demand.

Question 35

What are substitute goods in cross elasticity of demand

Answer 35

Always positive because the demand for one good increase when the price for the substitute good increases.

Question 36

What is weak substitutes

Answer 36

the two products have a positive but low cross elasticity of demand

Question 37

What are complementary goods in cross elasticity of demand

Answer 37

Cross elasticity of demand for complementary goods is negative. As the price for one item increases, an item closely associated with that item and necessary for its consumption decreases because the demand for the main good has also dropped.

Question 38

What does an inelastic supply line look like on a graph

Answer 38

The supply line would be steep

Question 39

What does a perfectly inelastic supply line look like on a graph

Answer 39

A vertical line

Question 40

What does an elastic supply line look like on a graph

Answer 40

The supply line would be more flat and the start will be raised higher

Question 41

What does a perfectly elastic supply line look like on a graph

Answer 41

A horizontal line

Question 42

What is marginal utility

Answer 42

The decrease or increase in satisfaction a consumer has from the consumption of each extra unit of a good or service.

Question 43

How to find the real value when there is an inflation increase

Answer 43

Real value = (nominal value/price index) x 100

Question 44

How do you find the mean

Answer 44

You find the mean by adding all the values together then dividing it by the amount of values.

Question 45

How do you find the median

Answer 45

You find the median by creating a list of the values in order then seeing what the middle value is.

Question 46

How do you calculate a change in the price index

Answer 46

Find the difference between the change then divide it by the original number, then you add or subtract the number by the base value