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Micro Economics > 1.2.1 - 1.2.3 > Flashcards

1.2.1 - 1.2.3 Flashcards

1
Q

What are the 4 Economics Agents?

A

Consumers
Producer
Government
Workers

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2
Q

How do Rational Consumers act?

A

Consumers aim to maximise their utility.

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3
Q

How do Rational producers act?

A

Producers sell their goods and services in order to maximise their profits.

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4
Q

How do Workers act rationally?

A

They balance their welfare with the benefits provided from their job and pay.

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5
Q

How do Governments act rationally?

A

They aim to maximise the welfare of society.

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6
Q

What is demand?

A

The amount of people who are willing to purchase a good or service, within a given period of time and given price.

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7
Q

What are the causes of a shift in Demand?

A

Changes in real income
Changes in tastes
Advertising/Branding
Changes in substitute prices
Changes in complementary goods
Changes in population size

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8
Q

What is Marginal Utility?

A

The additional satisfaction gained from every extra unit consumed.

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9
Q

How does Diminishing Marginal Utility link with the Demand Curve?

A

The first unit consumed will have the highest utility, every other one after will have less satisfaction.

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10
Q

What does Diminishing Marginal Utility mean?

A

The utility gained from every extra unit consumed, will be lower than the previous one.

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11
Q

What is PED?

A

The responsiveness to demand following a change in price.

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12
Q

What is the formula of PED?

A

Percentage change in Q demanded/Percentage change in Price

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13
Q

What is the Law of Demand?

A

When there is an increase in price the result will be a decrease in demand.

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14
Q

What does a Perfectly Inelastic PED mean?

A

The is no change in Demand when there is a change in price.

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15
Q

What is the Value for Perfectly Inelastic PED?

A

0

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16
Q

What is an Inelastic PED?

A

The change in Quantity Demanded is less than change in price.

17
Q

What is the value off an Inelastic PED?

A

0-1

18
Q

Why will PED always become a negative calculation?

A

The law of demand.

19
Q

What is Unitary Elastic PED?

A

The change in Quantity demanded is the exact same as Change in Price.

20
Q

What value is Unitary Elastic PED?

A

1

21
Q

What is a Relatively Elastic PED?

A

The change in Quantity Demanded is greater than change in Price.

22
Q

What is a Perfectly Elastic PED?

A

The change in Quantity Demanded will fall to 0.

23
Q

What are 4 factors that effect PED?

A

Availability of Substitutes.
Addictiveness of product.
Price of product compared to income.
Time Period.

24
Q

Why might Time Period affect PED?

A

It gives consumers more time to look for substitutes.

25
Q

What is YED?

A

The responsiveness of quantity demanded for a product following a change in Income.

26
Q

What is the formula of YED?

A

% change in QD / % change in income

27
Q

What are the three types of goods related to YED?

A

Inferior
Normal Necessities
Normal Luxury

28
Q

What is a Normal Necessity and what value does it have?

A

0-1

Demand increases when income increases, however the quantity demanded is not as big as income change.

29
Q

What value does a Normal Luxury good have and what is it?

A

Demand increases when income rises, it is YED>1.

30
Q

What is a Inferior good and what is the value of it?

A

YED<0

Demand decreases when Income Increases.

31
Q

What are factors that influence YED?

A

Any factors within an economy which change wages of workers.

32
Q

What is Cross Price Elasticity of Demand?

A

The responsiveness of quantity demanded for a specific good, following a change in price of a different good.

33
Q

What is the formula for XED?

A

% change in Q of good A / % change in Q of Good B

34
Q

If the XED is Positive what does this mean?

A

Goods are substitute goods.

35
Q

What saying would you use to remember XED?

A

Party, Season, Near, Christmas

Positive, substitute, Negative, Complements

36
Q

What does it mean if XED is negative?

A

Goods are complements.

37
Q

What does it mean if XED>1?

A

Strongly Related.

38
Q

What does it mean if XED<1?

A

Weakly related.

39
Q

What does the Reveune Rule mean?

A

In order to maximise profits, firms should increase the price of Inelastic goods and Increase products that are Elastic.

Micro Economics (7 decks)

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