1

Question 1

Demand

Answer 1

Desire to acquire

Willingness to pay

Ability to pay

Question 2

Elasticity

Answer 2

Percentage change in QD

Over

Percentage change in price

Question 3

Determinants of price elasticity

Answer 3

Number and closeness of goods

Proportion of income spent on the good

Time

Question 4

Income elasticity

Answer 4

%change qd/ % change income

Determinants

Degree of necessity

Proportion of income spent on the good

Applications

Question 5

Cross price elasticity of demand

Answer 5

%change Qa / %change price b

Determinants

Closeness as substitutes (negative) or

Compliments (positive)

Applications

Question 6

Determinants of demand

Answer 6

Tastes

Number and price of substitutes 
And 
Complementary goods
Income
Distribution of income 
Expectations

Question 7

Supply

Answer 7

Why

Profit motive

New entrants

Production and costs

Determinants

Costs of production

Profitability of alternative goods
Profitability of goods in joint supply 
Nature and other random shocks 
Aims of producers 
Expectations of producers

Question 8

Price floor

Answer 8

Minimum price allowed by law

Create a surplus

Lost gains from trade - deadweight loss

Question 9

Price ceiling

Answer 9

Maximum price allowed by law

Create Shortages

Lost gains from trade deadweight loss