Y1 Price determination in a competitive market

Question 1

Market

Answer 1

A place that brings buyers and sellers together

Question 2

Demand

Answer 2

How many buyers are willing and able to pay

Question 3

Law of demand

Answer 3

Demand rises as price falls

Question 4

Income effect

Answer 4

If income is fixed, then when price falls, real incomes and demand will rise

Question 5

Substitution effect

Answer 5

If the price of a good rises, the demand for its subs will increase

Question 6

Supply

Answer 6

The quantity offered for sale at a given price

Question 7

PASIFIC

Answer 7

Population
Advertising
Substitutes
Income
Fashion
Interest rates
Complements

Question 8

PINTS WC

Answer 8

Productivity
Indirect tax
Number of firms
Technology (=better productivity)
Subsidies
Weather
Cost of production

Question 9

PED

Answer 9

Proportional responsiveness of demand to a change in price
>1 is elastic
1 is unit elastic
<1 is inelastic

Question 10

Velbem goods

Answer 10

Demand increases when price increases

Question 11

Factors of PED

Answer 11

Strength/number of subs
Luxury or necessity
Addictive
Income percent
Length of time of consideration

Question 12

PES

Answer 12

Proportional responsiveness of supply to a change in price
>1 is elastic
=1 is unit elastic
<1 is inelastic

Question 13

Factors of PES

Answer 13

Length of production time
Spare capacity
Stock level
Substitutability of FoP
Time period of change to market
Barriers to supply

Question 14

Consumer surplus

Answer 14

Difference between what consumers are prepared to pay and what they actually pay

Question 15

Producer surplus

Answer 15

Difference between what producers are prepared to sell for and what they actually sell for

Question 16

Types of tax

Answer 16

Indirect - On spending (VAT)
Direct - On income (Income tax)

Question 17

Types of indirect

Answer 17

Specific - Set amount per unit
Ad valorem - Percent extra on each unit

Question 18

Reasons for subsidy

Answer 18

To lower price
To increase supply
Protect jobs
Reduce unemployment

Question 19

Joint demand

Answer 19

When goods are demanded together (complements)

Question 20

Composite demand

Answer 20

Demand for a good that has multiple uses

Question 21

Joint supply

Answer 21

When production of one results in production of another

Question 22

Derived demand

Answer 22

Increased demand means increased need for land/labour

Question 23

XED

Answer 23

Proportional responsiveness of demand of a good to a change in price of a different good
Positive=Subs
Negative=Complements

Question 24

YED

Answer 24

Proportional responsiveness of demand to a change in incomes
>1 is luxury good
Between 0&1 is normal good
Negative is inferior good

Question 25

Invisible hand

Answer 25

Individuals working in their own interest will create an optimal market Adam Smith 1776

Question 26

Consumer sovereignty DELETE

Answer 26

Consumer preference decides what is produced

Question 27

Allocative efficiency

Answer 27

When the quantity produced is where D=S

Question 28

Productive efficiency

Answer 28

Every resource used to its full potential (average cost minimised)

Question 29

Dynamic efficiency

Answer 29

Small, consistent improvements to efficiency over time