1 - Demand Flashcards

1
Q

What is scarcity?

A

Unlimited wants, but limited resources.

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2
Q

What is resource allocation?

A

process which available resources are distributed and utilized to produce goods and services.

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3
Q

Objectives of the 3 economic agents (Consumer, producer, government)

A

Consumer: Maximise utility
Producer: Maximise profit
Government: Maximise social welfare

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4
Q

Define ‘rationality’

A

Maximising utility, profit, social welfare.

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5
Q

Define ‘demand’

A

The quantity of a good and service that consumers are willing and able to buy at any price in a given time period.

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6
Q

Define ‘ceteris paribus’

A

Other factors being equal

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7
Q

Define ‘market’

A

Any place where buyers and sellers meet to exchange goods and services.

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8
Q

Define ‘Law of demand’

A

States that an inverse relationship between price and quantity demanded of a good or service.

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9
Q

Define ‘vablen good’

A

Good that demand increases as price increases due to its exclusive nature and appeal as a status symbol.

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10
Q

What are the factors/conditions of demand?

A

Price of other substitutes
Income changes
Trend, fashion
Advertising and branding
Population change in size and distribution

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11
Q

Define ‘normal good’

A

Good which quantity demanded increases as income increases.

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12
Q

Define ‘inferior good’

A

Quantity demanded decreases as income increases.

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13
Q

Define ‘giffen good’

A

Demand increases as price increase due to its inferior nature with the lack of substitutes

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14
Q

Define ‘Substitute good’

A

Goods consumers regard as alternative

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15
Q

Define ‘complement goods’

A

Goods that consumers consume jointly.

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16
Q

Define ‘marginal utility’

A

Change in total utility from the additional consumption of a product or service

17
Q

Define ‘diminishing marginal utility’

A

Consumer gains less extra utility from consuming each addition unit of a good.

18
Q

Define elasticity of demand, income elasticity, cross elasticity, supply.

A
  1. Measure of the sensitivity of quantity demanded to a change in price of a good or service.
  2. Measure of sensitivity of quantity demanded to a change in consumer income.
  3. Measure of sensitivity of quantity demanded to a change in price of another good or service.
  4. Measure of sensitivity of quantity supplied to a change in price of a good or service.
19
Q

Factors of PED

A

Availability of substitutes, nature of product, time period, proportion of income spent, durability of product

20
Q

Total revenue formula

A

Price x Quantity