1.2.1 - 1.2.3

Question 1

What are the 4 Economics Agents?

Answer 1

Consumers
Producer
Government
Workers

Question 2

How do Rational Consumers act?

Answer 2

Consumers aim to maximise their utility.

Question 3

How do Rational producers act?

Answer 3

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

Question 4

How do Workers act rationally?

Answer 4

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

Question 5

How do Governments act rationally?

Answer 5

They aim to maximise the welfare of society.

Question 6

What is demand?

Answer 6

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

Question 7

What are the causes of a shift in Demand?

Answer 7

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

Question 8

What is Marginal Utility?

Answer 8

The additional satisfaction gained from every extra unit consumed.

Question 9

How does Diminishing Marginal Utility link with the Demand Curve?

Answer 9

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

Question 10

What does Diminishing Marginal Utility mean?

Answer 10

The additional satisfaction gained from every extra unit consumed is lower than the previous unit consumed.

Question 11

What is PED?

Answer 11

The responsiveness to demand following a change in price.

Question 12

What is the formula of PED?

Answer 12

Percentage change in Q demanded/Percentage change in Price

Question 13

What is the Law of Demand?

Answer 13

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

Question 14

What does a Perfectly Inelastic PED mean?

Answer 14

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

Question 15

What is the Value for Perfectly Inelastic PED?

Answer 15

0

Question 16

What is an Inelastic PED?

Answer 16

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

Question 17

What is the value off an Inelastic PED?

Answer 17

0-1

Question 18

Why will PED always become a negative calculation?

Answer 18

The law of demand.

Question 19

What is Unitary Elastic PED?

Answer 19

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

Question 20

What value is Unitary Elastic PED?

Answer 20

-1

Question 21

What is a Relatively Elastic PED?

Answer 21

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

Question 22

What is a Perfectly Elastic PED?

Answer 22

The change in Quantity Demanded will fall to 0.

Question 23

What are 4 factors that effect PED?

Answer 23

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

Question 24

Why might Time Period affect PED?

Answer 24

It gives consumers more time to look for substitutes.

Question 25

What is YED?

Answer 25

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

Question 26

What is the formula of YED?

Answer 26

% change in QD / % change in income

Question 27

What are the three types of goods related to YED?

Answer 27

Inferior Normal Necessities Normal Luxury

Question 28

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

Answer 28

0-1 Demand increases when income increases, however the quantity demanded is not as big as income change.

Question 29

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

Answer 29

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

Question 30

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

Answer 30

YED<0 Demand decreases when Income Increases.

Question 31

What are factors that influence YED?

Answer 31

Any factors within an economy which change wages of workers.

Question 32

What is Cross Price Elasticity of Demand?

Answer 32

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

Question 33

What is the formula for XED?

Answer 33

% change in QD of good A / % change in Price of Good B

Question 34

If the XED is Positive what does this mean?

Answer 34

Goods are substitute goods.

Question 35

What saying would you use to remember XED?

Answer 35

Party, Season, Near, Christmas Positive, substitute, Negative, Complements

Question 36

What does it mean if XED is negative?

Answer 36

Goods are complements.

Question 37

What does it mean if XED>1?

Answer 37

Strongly Related.

Question 38

What does it mean if XED<1?

Answer 38

Weakly related.

Question 39

What does the Reveune Rule mean?

Answer 39

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