1.2 How Markets Work Flashcards

1
Q

Demand definition

A

Ability + willingness to buy a good at a given price and a given time period

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2
Q

Factors to shift demand (PASIFIC)

A

Population, Advertising, Substitutes, Income, Fashion & Trends, Interest rates, Compliments

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3
Q

PED (Q before you P)

A

The responsiveness of D to a change in the price of a good

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4
Q

Value for elastic PED

A

-1 to infinity

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5
Q

Value for inelastic PED

A

0 to 1

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6
Q

Factors affecting PED (PANTA)

A

Price in proportion to total income, Availability of substitutes, Necessity, Time period, Addictiveness

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7
Q

Significance of PED and Tax

A

More elastic the D curve, the lower the incidence of tax on the consumer (and vice versa)

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8
Q

Significance of PED and Subsidies

A

Subsidy = affects costs. Elastic D means that consumer sees a small fall in price whilst producer gains a lot in extra rev

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9
Q

Income Elasticity of Demand (YED)

A

The responsiveness of D to a change in income

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10
Q

YED for an inferior good

A

less than 0

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11
Q

YED for a normal good

A

greater than 0

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12
Q

Cross Elasticity of Demand (XED)

A

The responsiveness of D for one product (A) to a change in price of another product (B)

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13
Q

XED for a substitute

A

greater than 0

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14
Q

XED for a complementary good

A

less than 0

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15
Q

Supply

A

The willingness + ability to provide a good at a particular price at a particular time period

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16
Q

Factors to shift supply (PINTSWC)

A

Productivity, Indirect tax, Number of firms, Tech, Subsidies, Weather, Cost of production

17
Q

PES

A

The responsiveness of a S to a change in the price of a good

18
Q

Factors affecting PES (PSSST)

A

Production log, Stocks, Spare capacity, Substitutability of FOPs, Time