20 Questions

Question 1

What are the 6 causes of changes in demand?

Answer 1

Price
Incomes
Fashions, tastes & preferences
Advertising & branding 
External shocks
Seasonal factors

Question 2

What is demand

Answer 2

The quantity that customers are willing and able to buy at a given price in a given period of time.

Question 3

What’s the basic law of supply

Answer 3

As the selling price of a product rises, so the businesses expand supply to the market

Question 4

What are 4 main causes of changes in market supply

Answer 4

Costs of production
External shocks
New technology
Taxation and subsidies

Question 5

What is supply

Answer 5

The quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period

Question 6

What is a subsidy

Answer 6

Any form of government support- financial or otherwise- offered to producers and occasionally consumers

Question 7

What’s an equilibrium

Answer 7

When there is a balance between demand abs supply

Question 8

What is elasticity

Answer 8

The responsiveness of demand to a change in price or income

Question 9

How do you calculate PED

Answer 9

% change in QD
_______________
% change in price

Question 10

What is the value of PED if it’s price elastic

Answer 10

More than 1

Question 11

What is the value of PED if it’s price inelastic

Answer 11

Less than 1

Question 12

What is the value of PED if it’s unitary price elasticity

Answer 12

1

Question 13

What is income elasticity of demand

Answer 13

Measures the extent to which the quantity of a produces demanded is affected by a change in income

Question 14

How do you calculate YED

Answer 14

% change in QD
_______________
% change in income

Question 15

What value of YED will a luxury product have

Answer 15

More than 1

Question 16

What value of YED will a necessity have

Answer 16

Less than 1 but more than 0

Question 17

What value of YED will an inferior good have

Answer 17

Less than 1

Question 18

What’s PED

Answer 18

Measures the extent to which the quantity of a product demanded is affected by a change in price

Question 19

What are some limitations of using elasticities

Answer 19

Difficult to get reliable data on how demand changes.
Other factors affect demand eg consumer tastes.
Many markets are subject to rapid technological change so previous data is less reliable.
Competitors will react- pricing decisions can’t be taken in isolation

Question 20

What factors affect PED

Answer 20

Brand strength 
Necessity
Habit
Availability of substitutes
Time