1.2 How markets work Flashcards

1
Q

a) The underlying assumptions of rational economic
decision making:

A

o consumers aim to maximise utility
o firms aim to maximise profits

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2
Q

a) The distinction between movements along a demand
curve and shifts of a demand curve

A
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3
Q

b) The factors that may cause a shift in the demand curve
(the conditions of demand)

A
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4
Q

c) The concept of diminishing marginal utility and how this
influences the shape of the demand curve

A
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5
Q

a) Understanding of price, income and cross elasticities of
demand

A
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6
Q

b) Use formulae to calculate price, income and cross
elasticities of demand

A
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7
Q

c) Interpret numerical values of
o price elasticity of demand: unitary elastic, perfectly
and relatively elastic, and perfectly and relatively
inelastic
o income elasticity of demand: inferior, normal and
luxury goods; relatively elastic and relatively inelastic
o cross elasticity of demand: substitutes,
complementary and unrelated goods

A
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8
Q

d) The factors influencing elasticities of demand

A
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9
Q

e) The significance of elasticities of demand to firms and
government in terms of:
o the imposition of indirect taxes and subsidies
o changes in real income
o changes in the prices of substitute and
complementary goods

A
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10
Q

f) The relationship between price elasticity of demand and
total revenue (including calculation)

A
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11
Q

a) The distinction between movements along a supply
curve and shifts of a supply curve

A
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12
Q

b) The factors that may cause a shift in the supply curve
(the conditions of supply)

A
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13
Q

a) Understanding of price elasticity of supply

A
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14
Q

b) Use formula to calculate price elasticity of supply

A
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15
Q

c) Interpret numerical values of price elasticity of supply:
perfectly and relatively elastic, and perfectly and
relatively inelastic

A
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16
Q

d) Factors that influence price elasticity of supply

A
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17
Q

e) The distinction between short run and long run in
economics and its significance for elasticity of supply

A
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18
Q

a) Equilibrium price and quantity and how they are
determined

A
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19
Q

b) The use of supply and demand diagrams to depict
excess supply and excess demand

A
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20
Q

c) The operation of market forces to eliminate excess
demand and excess supply

A
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21
Q

d) The use of supply and demand diagrams to show how
shifts in demand and supply curves cause the
equilibrium price and quantity to change in real-world
situations

A
22
Q

a) Functions of the price mechanism to allocate resources:
o rationing
o incentive
o signalling

A
23
Q

b) The price mechanism in the context of different types of
markets, including local, national and global markets

A
24
Q

a) The distinction between consumer and producer surplus

A
25
Q

b) The use of supply and demand diagrams to illustrate
consumer and producer surplus

A
26
Q

b) The use of supply and demand diagrams to illustrate
consumer and producer surplus

A
27
Q

c) How changes in supply and demand might affect
consumer and producer surplus

A
28
Q

a) Supply and demand analysis, elasticities, and:
o the impact of indirect taxes on consumers, producers
and government
o the incidence of indirect taxes on consumers and
producers
o the impact of subsidies on consumers, producers and
government
o the area that represents the producer subsidy and
consumer subsidy

A
29
Q

a) The reasons why consumers may not behave rationally:

A

o consideration of the influence of other people’s
behaviour
o the importance of habitual behaviour
o consumer weakness at computation

30
Q

Subsidy EVALUATION

A
31
Q

subsidy CS&PS calculation

A
32
Q

demand APPLICATION

A
33
Q

state and explain types of demand WITH examples

A
34
Q

expl. individual vs market demand

A
35
Q

elasticity of demand EVALUATION

A
36
Q

YED application

A
37
Q

Types of supply WITH examples

A
38
Q

supply Application

A
39
Q

price determination APPLICATION

A
40
Q

price mechanism (ADVANTAGES and disadvantages

A
41
Q

indirect taxes APPLICATION

A
42
Q

indirect taxes EVALUATION

A
43
Q

expl. PED - total rev. and demand curve

A
44
Q

PED EVALUATIONNN

A
45
Q

expl. why we need to know ped

A
46
Q

expl. importance of knowing YED

A
47
Q

YED - APPLICATIOIN

A
48
Q

expl. importance of cross elasticity

A
49
Q

expl. strong vs weak XED

A
50
Q

what are giffen goods

A