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Microeconomics > Flashcard Set 2 > Flashcards

Flashcard Set 2

1
Q

What are the five conditions on demand?

A
  • Substitute goods
  • Complementary goods
  • Income
  • Tastes and preferences
  • Population size
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2
Q

What is specialisation?

A

Concentration on a task or product

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3
Q

What is the formula for Cross Price Elasticity (XED)?

A

% Change in price of GOOD B

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4
Q

What is the formula to work out Percentage Change?

A

Percentage Increase
—————————— X 100
Original Percentage

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5
Q

What is Absolute advantage?

A

The ability to produce a product using fewer resources.

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6
Q

What is Comparative advantage?

A

The ability to produce a product at a lower opportunity cost.

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7
Q

Output of Goods and Services =

A

Factor Inputs + Factor Productivity

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8
Q

What are Factor inputs?

A

Land, Labour, Capital & Enterprise

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9
Q

What is Factor Productivity?

A

Efficiency

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10
Q

What is Cross Price Elasticity of Demand (XED)?

A

XED measures responsiveness of demand for GOOD X following a change in the price of a related GOOD Y.

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11
Q

What are substitutes?

A

Products in competitive demand.

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12
Q

What happens if there is an increase in price of one good and there is a substitute/ rival product?

A

There will be an increase of demand for the rival product.

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13
Q

What is the Value of XED for two Substitutes?

A

Positive

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14
Q

What is the value of XED for two Compliments?

A

Negative

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15
Q

If the co-efficient of Price Elasticity of Demand <1 then demand is said to be…

A

Price Elastic

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16
Q

If the co-efficient of Price Elasticity of Demand >1 then demand is said to be…

A

Price Inelastic

17
Q

If the co-efficient of Price Elasticity of Demand =0 then demand is said to be…

A

Perfectly Inelastic

18
Q

If the co-efficient of Price Elasticity of Demand is INFINITY then demand is said to be…

A

Perfectly Elastic

19
Q

On a graph, which axis does price always go?

A

Y axis.

20
Q

What happens to the elasticity of products over time?

A

They become more elastic.

21
Q

What is efficiency?

A

Making the best use of resources.

22
Q

What is the formula for Price Elasticity of Demand?

A

% Change in Price

23
Q

Price change gets X or / ?

A

X

24
Q

Quantity demand gets X or / ?

A

/

25
Q

What is consumer Surplus?

A

When a consumer has to pay less than they were originally anticipating to pay

26
Q

State what Income Elasticity of Demand (YED) shows

A

Income Elasticity of Demand (YED) shows how responsive the demand for a product is to a change in (real) income.

27
Q

What is the formula for Income Elasticity of Demand (YED)?

A

% Change in quantity demanded
YED = ————————————————
% Change in real income

28
Q

What are the four main types of goods?

A
  • Normal goods
  • Luxury goods
  • Necessities
  • Inferior goods

Microeconomics (2 decks)

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