Theme 1

Question 1

What are the four economic agents?

Answer 1

Government, consumers, firms, employees

Question 2

What are the three economic questions?

Answer 2

What to produce? How to produce? For whom to produce?

Question 3

What’s total utility?

Answer 3

Total satisfaction from a given level of consumption

Question 4

What do suppliers pass onto consumers from the government?

Answer 4

VAT

Question 5

What happens when tax reduces supply?

Answer 5

Subsidies increase

Question 6

What does the supply curve show?

Answer 6

how much of a product producers will supply onto the market at each price

Question 7

What does a change in price do on a supply curve?

Answer 7

A movement along the curve

Question 8

What’s equilibrium?

Answer 8

The price at which the supply and demand curve meets, this is when the product that’s supplied onto the market will be bought

Question 9

What’s the price elasticity of demand equation?

Answer 9

Ped = % change in quantity demanded / % change in price

Question 10

Elasticity definition

Answer 10

the responsiveness of demand to changes in price

Question 11

Inelastic and elastic definitions

Answer 11

if the answers between 0 and -1 the relationship is inelastic
if the answers between -1 and infinity the relationship is elastic

Question 12

Elasticity equation

Answer 12

difference/ original x 100 (to find the percentage)

Question 13

What does the number or closeness of substitutes do to the elasticity of a product?

Answer 13

the greater the number of substitutes the more elastic the product is

Question 14

How does the proportion of income taken up by the product affect elasticity

Answer 14

The smaller the proportion of income taken up the more inelastic the product is

Question 15

What are the determinants of elasticity of supply?

Answer 15

Land, labour, capital and enterprise

Question 16

What’s the income elasticity of demand?

Answer 16

How much demand changes when income does

Question 17

What’s a normal good?

Answer 17

Demand rises as income rises and vice Verda (positive)

Question 18

What’s an inferior good?

Answer 18

Demand falls as income rises and vice versa

Question 19

What make something a luxury good?

Answer 19

When it’s got an elasticity of 2+

Question 20

What’s cross elasticity?

Answer 20

The responsiveness of demand of a good compared to changes in price of a substitute

Question 21

What values do substitutes and complements have?

Answer 21

Substitute is positive
Complement is negative

Question 22

What can the value tell you about the relationship of a product?

Answer 22

The higher the value the stronger the relationship

Question 23

What’s the definition of capital?

Answer 23

The financial or physical resources used to produce value in an economy

Question 24

What’s price mechanism?

Answer 24

The interaction of buyers and sellers in free markers

Question 25

What are the three functions of price mechanism?

Answer 25

Rationing, signalling and incentive

Question 26

What’s a rationing function?

Answer 26

When price rises the amount if people who can afford the product is rationed so rations the materials used for the product as less are made

Question 27

What’s a signaling function?

Answer 27

price change sends contrasting messages to producers and consumers, price decrease leads to consumers buying more and when demand increases when price increases it gives other producers a chance to enter the market

Question 28

Ceteris paribus

Answer 28

Everything stays the same

Question 29

Why are there shifts in the supply curve

Answer 29

Costs of production
Wages, raw materials
Taxes and subsidies
Natural factors