15 mark corrections pt2

Question 1

Composite demand

Answer 1

Demand for a good that has multiple different uses e.g. oil for plastic or petrol. An increased demand in plastic will cause a decreased supply for petrol

Question 2

Joint demand

Answer 2

When demand for 2 goods are linked but their demands aren’t dependent on each other. If they are complements/joint demand when the demand of 1 good increases so does the other. has a negative cross elasticity of demand.

Question 3

Joint supply

Answer 3

When a product can yield more than one output e.g. cows produce milk. leather, beef etc. If supply rises for milk, supply will rise for beef as they come from the same source.

Question 4

Joint supply-demand

Answer 4

If demand for cows rises, the Q (quantity demanded or supplied) rises to Q1. This is likely to cause a higher supply of milk (a by product of the cow)-lower price to entice customers to buy.

Question 5

PED

Answer 5

Price elasticity of demand is the responsiveness of demand to a change in price (the way consumers react). %change in quantity demanded / %change in price. If price is > 1, it is price elastic. If price is < 1, it is price inelastic. If answer = 0, it is perfectly inelastic. We look an the numbers not the + or -

Question 6

Price elastic

Answer 6

A change in price leads to a bigger % change in quantity demanded. Found in goods with more subs and firms are unlikely to increase price as this could lead to a fall in revenue. Instead they could try advertising to increase brand loyalty and make demand more inelastic.

Question 7

Price inelastic

Answer 7

A change in price leads to a smaller % change in quantity demanded. There are usually no close subs and increasing price will cause quantity demanded to decrease but can still lead to an increased revenue. e.g. 15x10=150 but 25x8=200

Question 8

Perfectly elastic

Answer 8

Any change in price means demand will fall to 0 as consumers are willing to buy at a specific price but nothing higher or lower. Very rare in reality

Question 9

Perfectly inelastic

Answer 9

Any change in price leads to no change in quantity demanded. Consumers are willing to buy at various prices as there are no close subs e.g. insulin.

Question 10

What are PED’s influenced by

Answer 10

Type of good
Substitute availability
% of income spent on good

Question 11

Type of good

Answer 11

Essentials(elastic)
Non essentials(inelastic)
Addictive substances(inelastic)

Question 12

Substitute availability and % of income spent on good

Answer 12

1.More availability=more elastic
2.Expensive goods tend to be more elastic e.g. fridges have different prices.