1. The Market System: Unit 8 -10 Flashcards

1
Q
  1. What is PED? (price elasticity of demand)
A
  • PEd, is the responsiveness of demand to a change in price.
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2
Q

How to calculate PED?

A

PED = % change in quantity demanded
————————————————
% change in price

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3
Q
  1. What is inelastic demand?
A

inelastic demand is a change in price that results in a proportionately smaller change in the quantity demanded.

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4
Q
  1. What is elastic demand?
A

change in price results in a greater change in the quantity demanded.(price elastic)

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5
Q
  1. What are the 3 types of elasticity?
A
  • perfectly elastic
  • perfectly inelastic
  • unitary elastic
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6
Q
  1. What is perfectly elastic?(demand)
A
  • demand where PED = infinity ( an increase in price will result in zero demand)
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7
Q
  1. What is perfectly inelastic?(demand)
A
  • demand where PED = 0. ( a change in price will result in no change in the quantity demanded)
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8
Q
  1. What is unitary elasticity?(demand)
A
  • where PED = - 1 (the responsiveness of demand is proportionately equal to the change in price)
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9
Q
  1. What are the 4 factors affecting price elasticity of demand?
A

Time
Income
Necessity
Substitutes

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10
Q
  1. What is the price elasticity of supply?(PES)
A
  • price elasticity of supply is the responsiveness of supply to a change in price.
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11
Q
  1. What is a fast-moving consumer good?(FMACG)
A

goods, especially food, that sell very quickly and in large amounts.

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12
Q
  1. What is inelastic supply?
A

inelastic supply is the change in price that results in a proportionately smaller change in the quantity supplied.

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13
Q
  1. What is elastic supply?
A

change in price results in a proportionately greater change in the quantity supplied.

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14
Q
  1. What is unitary elasticity of supply?
A
  • where PES = 1. a change in price will be matched by an identical change in the quantity supplied.
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15
Q
  1. What are raw materials?
A

substances used to make a product.

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16
Q
  1. What are the 4 factors influencing PES?
A

Factors of production.
Availability of stocks.
Spare capacity.
Time.

17
Q
  1. What is the income elasticity of demand?
A

income elasticity of demand is responsiveness of demand to a change income.

18
Q
  1. How to calculate Income elasticity of demand?
A

YED = % change in quantity demanded
————————————————–
% change in income

19
Q
  1. Name the 4 types of goods.
A
  • necessities
  • Luxury goods
  • Normal goods
  • Inferior goods
20
Q
  1. What is luxury goods?
A
  • Luxury goods are goods that consumers like to buy if they can afford them.
21
Q
  1. What is Normal goods?
A
  • are goods that have a positive relationship with incomes, when income increases demand for the good also increases.
22
Q
  1. What is necessities?
A
  • Necessities are “basic good” that consumers need to buy.
23
Q

22, What is inferior goods?

A

inferior goods are goods that have a negative relationship with income.

24
Q
  1. Benefits of income elasticity to a business.
A
  • Can switch production
  • can control production
25
Q
  1. 2 ways the government has an impact on price elasticity.
A
  • Subsidies
  • Indirect taxes