SUPPLY AND DEMAND

Question 1

What is the formula for PED

Answer 1

%Change in quantity demand / %Change in price

Question 2

PED will always be negative why?

Answer 2

because when price increases, quantity demanded decreases
but when price decreases, quantity demanded increases.

Question 3

Demand is elastic when

Answer 3

PED is between -1 and - infinity

Question 4

What does PED measure

Answer 4

PED measures how much quantity demanded changes in response to a change in price

Question 5

Inelastic demand is when

Answer 5

PED is between -1 and 0

Question 6

What is unitary elastic demand

Answer 6

When PED = -1

Question 7

What does an Elastic demand curve look like

Answer 7

Gentle, flatter slope because a small change along the price axis leads to a larger % change along the quantity axis.

Question 8

What does an inelastic demand curve look like

Answer 8

Steeper slope because a large change along the price axis leads to a smaller % change along the quantity axis.

Question 9

What does the unitary elastic demand curve look like

Answer 9

Looks like the first half of a u

Question 10

Perfectly inelastic demand is when

Answer 10

PED = 0

Question 11

Perfectly elastic demand is when

Answer 11

PED = - infinity

Question 12

What are the factors which affed PED

Answer 12

NASBIT

Necessity or luxury

Addictive or habit-forming

Substitutes

Brand loyalty

Proportion of Income

Time

Question 13

What happens to elasticity in the long run

Answer 13

In the long run, elasticity of demand and supply tends to increase compared to the short run.

Question 14

If demand is elastic, when price increases what happens to revenue

Answer 14

quantity demanded will fall by larger %, so total revenue will decrease

Question 15

If demand is elastic, when price decreases what happens to total revenue

Answer 15

total revenue will increase, because quantity will increase by a larger %

Question 16

Describe the total revenue diagram for when price decreases for an elastic good

Answer 16

Add diagram

Question 17

Inelastic demand and total revenue describe

Answer 17

Add diagram

Question 18

What happens to total revenue when a good has unitary elastic demand

Answer 18

Whether price increases or decreases, total revenue will not change at all

Question 19

What is the PED of a necessity

Answer 19

Necessities tend to be inelastic

Question 20

What do you think it means if a good is a necessity?

Answer 20

It means that we need it to live our lives

Question 21

What does it mean if a good is a luxury

Answer 21

It means that the good is not needed, but is nice to have if a consumer can afford it

Question 22

What happens to elasticity in the long run and why

Answer 22

Elasticity increases in the long run

More time to look for substitutes

therefore more elastic

Question 23

What happens to normal goods when income changes

Answer 23

For normal goods demand will increase when incomes rise,

demand will decrease when incomes fall.

Question 24

What happens to inferior goods when incomes change

Answer 24

For inferior goods demand will increase when incomes fall

and demand will decrease when incomes rise.

Question 25

What happens to the demand for substitute goods when price of other goods changes

Answer 25

For substitute goods demand for the first good will decrease when price of second good falls, and demand for the first good will increase when price of second good rises.

Question 26

What happens to complementary goods when the price of other goods changes

Answer 26

For complementary goods demand for the first good will increase when price of second good falls, and demand for the first good (iPhone) will decrease when price of second good (iPhone apps) rises.

Question 27

We only move along the demand curve

Answer 27

When price changes, any other factor will shift the demand curve

Question 28

With substitute goods, if the price of one good goes down, demand for the other good will:

Answer 28

decrease

Question 29

With substitute goods, if the price of one good goes up demand for the other good will:

Answer 29

increase

Question 30

What are complementary goods

Answer 30

Complementary goods are goods which are bought and used together

Question 31

If the price of one complementary good went up, demand for the other good would:

Answer 31

Decrease

Question 32

What are the 6 factors which affect demand

Answer 32

Advertising Fashion and trends population and age structure Seasons Income Price of other goods

Question 33

The factors that shift demand are also known as:

Answer 33

conditions of demand

Question 34

what kind of goods have a negative yed

Answer 34

Inferior Goods

Question 35

What kind of goods have a yed between 0 and 1

Answer 35

Normal goods

Question 36

What kind of goods have a income elasticity between 0 and 1

Answer 36

income inelastic goods or necessities

Question 37

what kind of goods have a yed of greater than 1

Answer 37

Luxury goods

Question 38

What is the xed for complements

Answer 38

negative

Question 39

what is the xed for substitutes

Answer 39

positive

Question 40

When xed = 0 the two goods are..

Answer 40

unrelated goods

Question 41

what is the formula for xed

Answer 41

%change in demand for good a / % change in price for good b

Question 42

what does it mean if a producer supplies something

Answer 42

they are willing and able to sell it

Question 43

Price elasticity of supply measures:

Answer 43

how much quantity supplied changes in response to a change in price

Question 44

What is the formula for PES

Answer 44

%change in qs / %change in price

Question 45

Why might we get a PES bigger than 1?

Answer 45

If the % change in Qs is bigger than % change in Price

Question 46

Supply is elastic when:

Answer 46

PES is between 1 and infinity

Question 47

A good will have a PES smaller than 1 if:

Answer 47

the % change in Qs is smaller than the % change in price

Question 48

Inelastic supply is when PES is:

Answer 48

between 0 and 1

Question 49

When PES =1 supply is:

Answer 49

unitary elastic

Question 50

When PES = 0 we say that supply is:

Answer 50

perfectly inelastic

Question 51

If the state of the economy is bad, if people are unemployed and shops are vacant after businesses had to close down, how easy will it be to expand your business and increase the quantity you supply?

Answer 51

it will actually be very easy for to expand his business. If workers are unemployed, it'll easily be able to find people to work .

Question 52

What are the the factors which affect PES

Answer 52

TEASS Time State of the Economy Availability of factors of production Spare capacity Stockpiles and perishability

Question 53

What are the factors that affect supply?

Answer 53

Technology Weather Costs Number of suppliers Productivity