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Y11 Econ > supply, demand, elasticity, taxes, subsidies & competition > Flashcards

supply, demand, elasticity, taxes, subsidies & competition Flashcards

(87 cards)

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1
Q

what are consumer protection laws

A

laws which protect consumers from exploitation and harmful business activities

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2
Q

list 3 competition policies

A

regulating the prices and service levels of monopolies
imposing fines on firms that abuse their market power
forcing monopolies to break up into smaller competition firms

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3
Q

what is competition policy

A

refers to measures governments use to control the behaviour of firms acting anti-competitively and against the interests of consumers

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4
Q

what is x-inefficiency

A

a monopoly may be poorly managed and inefficient if it does not face any competition

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5
Q

list 3 ways a monopoly may abuse its power

A

restrict market supply to force price up
restrict competition and consumer choice
cut product quality to save costs

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6
Q

what are natural barriers to entry

A

those barriers to entry which occur because large-scale production is often more efficient

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7
Q

what are artificial barriers to entry

A

those barriers created artificially and used by a monopoly to restrict competition

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8
Q

list two types of barriers to entry

A

artificial barriers to entry and natural barriers to entry

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9
Q

what are abnormal profits

A

excess profits above what they would be if there was competition

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10
Q

y do monopolies restrict supply

A

to force up the market price and earn abnormal profits

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11
Q

what is a monopoly

A

a single firm or grp of firms acting together with sufficient market power to restruct competition and set the market price

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12
Q

list 4 types of competition

A

perfect competition
monopolistic competition
oligopoly
monopoly

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13
Q

what is normal profits

A

the minimum amount of profit a firm needs to stay in the market

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14
Q

what are 2 differences between perfect competition and pure monopoly

A

in a perfect competition there are many suppliers with identical products and in a pure monopoly there is a single large supplier

in perfect comp, individual firms have no control over market price, in a monopoly, firms can determine market price

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15
Q

what can predatory pricing result in

A

damaging price wars

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16
Q

what is a disadvantage of cost based pricing

A

it takes no account of what consumers may be willing to pay or how much competition there is

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17
Q

cost plus pricing formula

A

tc/output + mark-up = selling price

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18
Q

what is cost pluw pricing

A

it involves estimating how many of the product will be produced and then calculating tc of producing this output and finally adding a percentage markup for profit.

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19
Q

why is price leadership done

A

to avoid price wars

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20
Q

what is price leadership

A

firms with the largest market share who are the price leaders will raise or lower its prices and other firms in the market will do the same.

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21
Q

what is price wars

A

involves setting the prices in line with the competitors price or just below their prices

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22
Q

what is predatory pricing

A

prices are cut down deeper often below the costs in order to destroy sales of new or existing competitor

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23
Q

when is price skimming used commonly

A

with products which are new inventions and ppl r willing to pay a premium price because of the novelty.

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24
Q

what is price skimming

A

this is when product is launched at a premium price.

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25
when is penetration pricing usually followed
when there is a lot of competition and the product may not be unique
26
what is penetration pricing
involves setting the price lower than the competitors prices
27
list a cost based pricing strat
cost plus pricing
28
list 3 competitive pricing strats
predatory pricing price wars price leadership
29
list two demand based pricing strategies
penetration pricing price skimming
30
list 3 types of pricing strategies
demand based pricing, competition based pricing. cost-based pricing
31
list 2 types of advertising
informative and persuasive
32
what is non-price competition
competing on all other product features other than price
33
what is price competition
competing with rival suppliers on product price
34
what are the 2 types of competition
price competition, non price competition
35
%change in price formula
p2-p1/p1 x 100
36
%change in qty formula
q2-q1/q1 x 100
37
list 2 disadvantages of subsidies
causes excess supply distorts international competition
38
list 3 advantages of subsidies
used in agriculture to support farmers encourages innovation used to encourage production and lower cost of solar panels and turbines
39
what does a subsidy do
causes firms supply curve to shift to the right since cop is reduced.
40
what is a subsidy
incentive given by the government to individuals or businesses in the form of cash, grants or tax breaks that improve the supply of certain goods and services.
41
what does an ad valorem tax do
shifts up the supply curve by a certain percentage meaning the new supply curve will not be parallel to the original. The amount of tax per unit increases as price increases
42
what does a specific unit tax do
shifts up supply curve by the full amount of the tax so that the new curve is parallel to the original one.
43
what is an unit tax
set amount of tax per unit sold
44
what are the 2 types of indirect taxes
specific and ad valorem taxes
45
list 3 purposes of indirect taxes
- generate tax revenue for a government - discourage consumption of harmful products - encourage consumption of good productsq
46
what are direct taxes
those taxes which are levied on incomes of households and firms
47
what is a synonym for indirect taxes
expenditure taxes
48
what are indirect taxes
those taxes imposed by a government on goods and services.
49
what is perfectly inelastic supply
a change in price will not affect supply at all. PES = 0
50
what is perfectly elastic supply
at a certain price, producers are prepared to supply any amount. PES is infinite
51
what is inelastic supply
when changes in price result in smaller changes in qty supplied. PES<1
52
what is elastic supply
when changes in price lead to greater changes in qty supplied. PES>1
53
PES formula
%change in qty supplied/%change in price
54
what is PES
measure of responsiveness of quantity supplied to a change in price
55
what should a firm do if good is inelastic to make profits
increase price
56
what should a firm do if a good is elastic to make profits
reduce price
57
total revenue formula
P x Q
58
What is total revenue
amount paid by buyers and received by sellers of a good
59
what is unitary elastic demand
when change in price leads to equal changes in qty demanded. PED = 1
60
what is perfectly elastic demand
At a certain price, the demand of that product is infinite. PED is infinite
61
what is perfectly inelastic demand
rise or fall in the price of the product causes no change in the quantity demanded of the product. PED = 0
62
what is inelastic demand
when change in price leads to smaller change in qty demanded PED<1
63
what is elastic demand
when change in price leads to greater change in qty demanded. PED > 1
64
ped formula
%change in qty demanded/%change in price
65
what is price elasticity of demand
measure of responsiveness of qty demanded to a change in price
66
what happens to demand curve when there is an decrease in demand
shift in demand curve to left creating temporary surplus causing prices and quantity to go down
67
what happens to demand curve when there is an increase in demand
shift in demand curve to right creating temporary shortage which causes prices and quantity to increase
68
what happens to prices when there is a shortage
prices tend to rise until equilibrium is resoted
69
what is shortage
when the qty demanded exceeds qty supplied at a given price
70
what happens to prices when there is a surplus
prices tend to fall until equilibrium is restored
71
what is surplus
when the qty supplied exceeds qty demanded at a given price
72
what is equilibrium
when the qty supplied and qty demanded are equal. there is no surplus or shortage
73
what happens to a supply curve when theres an decrease in supply
shifts to left creating temporary shortage causing prices to increase and quantity to decrease.
74
what happens to a supply curve when theres an increase in supply
shifts to the right creating temporary surplus causing prices to decrease and quantity to increase.
75
when does a supply curve shift
whenever a non price factor influences supply changes
76
what is contraction of supply
ceteris paribus, decrease in quantity supplied due to the decrease in prices which leads to downward movement along the supply curve
77
what is extension in supply
ceteris paribus, increase in quantity supplied due to the increase in prices which leads to upward movement along the supply curve
78
what is law of supply
ceteris paribus, a higher price leads to a higher quantity supplied and that a lower price leads to a lower quantity supplied. there is a direct relationship between price and qty supplied
79
what is quantity supplied
the amount of goods and services producers are willing and able to sell to consumers at any given price.
80
what is decrease in demand
decrease in demand means that consumers now demand less of a product at each and every price than they did before, demand curve will shift to the left
81
what is increase in demand
it means that consumers now demand more of a product at each and every price than they did before, demand curve shifts to the right
82
what is extension in demand
ceteris paribus, when price decreases, quantity demanded increases, there is a downward movement along demand curve
83
what is contraction in demand
ceteris paribus, when price increases, quantity demand decreases. there is an upward movement along the demand curve
84
what is the law of demand
ceteris paribus, if price of a good or a service increases, quantity demanded decreases and vice versa. There is inverse relationship between price and quantity demanded
85
what is market demand
total demand for that product from all its consumers
86
what is individual demand
demand of just one customer
87
what is demand
willingness and ability to purchase a good or service at any given price

Y11 Econ (5 decks)

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