3 Price determination in a competitive market

Question 1

Why does demand curve shift?

Answer 1

-real disponible incomes
-tastes and preferences
-population
-prices of substitute products
-prices of complementary products

Question 2

Unitary elastic demand

Answer 2

PED = -1

Question 3

Determinants of PED

Answer 3

-availability of close substitutes
-percentage of income spent on the product
-nature of the product
-time period
-broad or specific market definition

Question 4

Luxury goods

Answer 4

income elastic

Question 5

Necessities

Answer 5

income inelastic

Question 6

Inferior goods

Answer 6

negative income elasticity

Question 7

Negative XED

Answer 7

complimentary goods

Question 8

Positive XED

Answer 8

substitutes

Question 9

Why does supply curve shifts?

Answer 9

-production cost
-productivity of labour
-taxes on businesses
-production subsidies
-technology

Question 10

Determinants of PES

Answer 10

-time takes to expand supply
-size of sore capacity
-available stocks
-ease of switching production

Question 11

Define joint demand

Answer 11

goods that tend to be demanded together

Question 12

Define Joint supply

Answer 12

when the production of one good leads to the production of another good

Question 13

Define composite demand

Answer 13

when the good is demand for more than one use

Question 14

Define Derived demand

Answer 14

when a particular good or factor of production is necessary for the provision of another good/service