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economics micro > 3.2 > Flashcards

3.2 Flashcards

1
Q

what is the definition of demand

A

the quantity of a good or service that consumers are willing and able to buy at a given price during a given time.

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2
Q

factors that influence consumers spending which will impact demand:

A

-price
-income
-wealth
-price of substitutes and complimentary goods
-indv preference

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3
Q

factors that shift demand

A

Population
Advertising
Substitutes
Income
Fashion and trends
Interest rates
Complements price

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4
Q

what is Diminishing marginal utility

A

an extra unit of the good is consumed. the marginal utility (the benefit derived from consuming the good) falls

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5
Q

definition of supply

A

Quantity of goods or services that a producer is able and willing to supply at a given price at a given time

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6
Q

factors that shift supply

A

Productivity -high productivity higher supply

Indirect tax -VAT - Inward/left shift supply

No of firms- more firms=more competition = more supply

Technology

Subsidy - Grant given by the government in order to Increase supply (incentive )

Weather agriculture - crops Cost of production

Cost of production (transport, labour, oil, raw material)

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7
Q

Price elasticity of demand

A

The responsiveness of demand to a change in price

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8
Q

eq for PED

A

% Change in quantity demanded / % change in price

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9
Q

Price elastic

A

A change in price results in a greater change in quantity

For e.g availability of substitutes- Washing machines/fridges

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10
Q

price inelastic

A

A change in prices results in a smaller change in quantity (less responsive)

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11
Q

if an elasticity is >1

A

price elastic

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12
Q

if an elasticity is < 1

A

inelastic

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13
Q

what does it mean by perfectly inelastic

A

regardless of a price change QD doesn’t change

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14
Q

perfectly elastic

A

change in price results to QD to fall to 0

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15
Q

number for perfectly inelastic

A

0

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16
Q

number for perfectly price elastic

A

infinity

17
Q

what number for unit price elastic

A

1

18
Q

when is demand price elastic or inelastic

A

Substitutes - more substitutes = more elastic
Percentage of income= greater= elastic
Luxury- price elastic
necessity- inelastic
Addictive- inelastic
long run= elastic , short run= inelastic

19
Q

ppf points

A

point on the curve= productively efficient using all FOP to max level

point in the curve= productively inefficient

point outside the curve= unattainable

20
Q

price elasticity of supply

A

the responsiveness of quantity supplied given a change in price

21
Q

opportunity cost

A

Next best opportunity foregone when making a decision

22
Q

to calculate pes

A

% change in quantity supply/ % change in price

23
Q

factors that influence pes

A

Levels of stock / durability: Goods that can be stored are more price elastic in supply goods with little durability lifetime are inelastic

Time scale: In the short run, filipply can be more inelastic

Spare capacity = supply IS more elastic when there is spare capacity

Substitutes, Labour, Flexible/mobile, Transferrable skills, capital

Barriers to entry to the market “monopolies” own 25% or more of the marke share (e.g. Apple and Samsung) Phone market = High barriers to entry Supply of phones inelastic

24
Q

cross elasticity of demand (xed)

A

change in demand of one product given a change in price of another

25
Q

xed number meanings

A

elastic above 1 = strong related
below one= weak relation
0= no relationship

26
Q

xed compliments and substitutes

A

substitutes above 1 compliments below 1

27
Q

yed (income elasticity demand)

A

YED measures the responsiveness of quantity demanded given a change in income

28
Q

how to calculate yed

A

% change in quantity demanded / % change in income

29
Q

what do values for yed represent

A

if above 1= normal good
below 1= inferior

30
Q

for normal goods in yed

A

if above 1= normal luxury
if below 1= normal necessity

31
Q

for inferior good (yed)

A

above 1= income elastic
below 1= income inelastic

32
Q

total revenue eq

A

(pxq)

33
Q

what is the rs between elasticity and total revenue

A

elastic = opposite
inelastic= same

34
Q

interrelations between markets

A

joint demand (compliments) price rise for one = decreased demand for other

competitive demand (substitutes) one price increases demand for other increases

derived demand (input)= increased demand for cars = increased demand for aluminium

composite demand= increased demand for one = decreased supply for another (cheese and milk)

joint supply= increased production / demand of one good = increase supply of another good

economics micro (5 decks)

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