Price Determination in Competitive markets

Question 1

What is effective demand

Answer 1

Demand supported by the ability to pay

Question 2

What is the law of demand

Answer 2

inverse relationship of price and quantity

Question 3

Give conditions of demand

Answer 3

• Real income
• Interes rates
• Price expectations for future
• Price of Complimentary of Substitues

Question 4

What is an inferior good

Answer 4

demand inverse to income

Question 5

What are normal goods?

Answer 5

Direct relationship between income and demand

Question 6

What is real income

Answer 6

adjusted for inflation

Question 7

What are substitue goods

Answer 7

Good that is used in place of another and satisfy the same needs and wants

Question 8

What are complimentary goods

Answer 8

Goods than go hand in hand, and a change in demand for one will have same affect on the other

Question 9

What is the Law of Supply

Answer 9

Direct relationship between quantity supplies and price

Question 10

Give conditions of supply

Answer 10

• Changes in cop (taxes, exchnage rates, commoditiy prices)
• Goods in joint and competitive
• Future expected price
• Changes in tech (LRAS)

Question 11

What are indirect taxes

Answer 11

A tax levieis on expenditure of g/s

Question 12

what are subsidies

Answer 12

paymetns made by gov to firms for evech unit of output

Question 13

what are goods in joint supply

Answer 13

goods that stem frm the same source. By products of one another

Question 14

What are goods in competitive supply

Answer 14

Produced frm same resources, where increas ein output of one decrease other

Question 15

What is utility?

Answer 15

the satisfaction gained from g/s

Question 16

What is consumer soveriegnity

Answer 16

the economic power consumers have ont he market

Question 17

what is another word for equilirbium price

Answer 17

market clearing price

Question 18

where is market equilibrium

Answer 18

as=ad

Question 19

How to markets go back to equilbirum with excess supply

Answer 19

decrease prices, increase demand, equilibriu,

Question 20

How long does it take market to resolve equilibrium with egs

Answer 20

varies
retail few days
housing months or years

Question 21

what are dynamic markets
what is the vice versa

Answer 21

experience frequent changes
Static markets

Question 22

What to dynamic markets measure and other one

Answer 22

measure variables overtime
fixed conditions

Question 23

Give real world examples of resolving equilibrium

Answer 23

• covid - demand for sofa increase
• Puerto rico hurricane fionna, supply chain disruption, excess demand
• Subsidies for solar panels subsidies, excess supply

Question 24

WHat does PED measure

Answer 24

responsiveness the chnage in QD to change in P

Question 25

PED formula

Answer 25

%CQD/%CP

Question 26

Explain a PED value of 0. Draw diagram

Answer 26

Perfectly inelastic QD completely unresponsive

Question 27

Explain a PED value of 0-1. Draw diagram

Answer 27

Relatively inelastic QD change less than proportional

Question 28

Explain a PED value of 1. Draw diagram

Answer 28

Unitary elasticity QD change is same

Question 29

Explain a PED vlaue of 1+. Draw diagram

Answer 29

Relatively elastic QD change more than proportionate

Question 30

Explain PED value of infinite

Answer 30

Perfectly elastic Change in QD fall to zero with any price change

Question 31

How can knowing the price elasticity of their product help business owners?

Answer 31

If price inelastic (ish) increase price doesnt effect QD so increase profits.

Question 32

List Determinants of PED

Answer 32

1. Availability of substitues 2. Addictiveness 4. Price of product as a propotion of income spent 5. Time period

Question 33

Definition of YED

Answer 33

Measures responsiveness in QD to a change in income

Question 34

Formula for YED

Answer 34

%CQD/%CIncome

Question 35

Why do we need to know YED value?

Answer 35

Tells us type of product.

Question 36

Explain YED value of 0-1

Answer 36

Income inelastic Normal necessity

Question 37

Explain YED 1+

Answer 37

relatively income elastic Normal luxury

Question 38

Explain YED value of less than zero

Answer 38

Inferior good

Question 39

Define XED

Answer 39

Measures responsiveness the change in QD for good A is to change in price of good B

Question 40

Explain a XED of less than zero.

Answer 40

Complementary good

Question 41

XED Formula?

Answer 41

%CQDa / %CPb

Question 42

Explain XED value of more than 0

Answer 42

Substitute goods

Question 43

EXplain XED value 0

Answer 43

Unrelated goods

Question 44

Define PES

Answer 44

Measures how responsive the change in QS to a chaneg in price

Question 45

PES formula

Answer 45

%CQS / %CP

Question 46

Explain PES value of 0

Answer 46

Perfectly inelastic Unresponsive

Question 47

Explain PES value of 0-1

Answer 47

Relatively inelastic Less than proportional change

Question 48

Explain PES value of 1+

Answer 48

Realtive elastic More than proportional change

Question 49

Explain PES of infinity

Answer 49

QS fall to zero Theoretical

Question 50

Determinants of PES

Answer 50

1. Mobility of fop 2. Rate at which cop increase 3. Spare capacity 4. Ability to store g 5. Time period

Question 51

What are goods for joint demand? Give example

Answer 51

Complementary goods

Question 52

What are goods in competitve demand Give example

Answer 52

Substitute goods

Question 53

What are goods in composite demand? Example

Answer 53

A good with multiple uses Milk - cheese

Question 54

What are goods in derived demand? Give example

Answer 54

Demand for g/s arised from demand of another Phonecases and phones

Question 55

What type of good has xed 0-1 and more than 1

Answer 55

Weak substitues Strong substitutes

Question 56

How do you know if smth is elastic or inelastic

Answer 56

Value of more than 1 is elastic

Question 57

If value of elasticity is less that zero what is it known as

Answer 57

Negative elastic or inelastic

Question 58

What is relatively elastic

Answer 58

1 pluz

Question 59

What is relatively inelastic

Answer 59

0 to 1

Question 60

What is perfectly elastic

Answer 60

Infinite

Question 61

What is perfectly inelastic

Answer 61

Zero