APP ECO 4Th LESSOn

Question 1

is when there is an excess demand for the quantity supplied.

Answer 1

Shortage

Question 2

is excess in supply.

Answer 2

surplus

Question 3

the willingness to buy goods and services should be accompanied by the ability to buy, also called the

Answer 3

purchasing power

Question 4

acts as a signal for shortages and surpluses which help firms and consumers respond to changing market conditions.

Answer 4

price

Question 5

– price will tend to rise. Rising prices discourage demand, and encourage firms to try and increase supply

Answer 5

if goods is in shortage

Question 6

– price will tend to fall. Falling price encourage people to buy, and cause firms to try and cut back on supply.

Answer 6

if goods is in surplus

Question 7

The producers can make what they want and consumers are free to purchase what they want.

Answer 7

market economy

Question 8

quantity is less than the demand;

Answer 8

shortage

Question 9

measures the responsiveness of the quantity demanded or supplied of a good to a change in its price.

Answer 9

Price elasticity

Question 10

is the responsiveness of quantity demanded, or how much quantity demanded changes, given a change in the price of goods or services.

Answer 10

Price elasticity of demand

Question 11

the percentage change in price brings about a more than proportionate change in quantity demanded.

Answer 11

Elastic demand

Question 12

– is when an increase in price causes a smaller % fall in demand.

Answer 12

inelastic demand

Question 13

• When the percentage change in demand is equal to the percentage change in price,

Answer 13

unitary elastic demand

Question 14

• the PED is =0 any change in price will not have any effect on the demand of the product

Answer 14

perfectly inelastic

Question 15

is the relationship between changes in quantity demanded for a good and a change in real income.

Answer 15

income elasticity of demand

Question 16

are those goods for which the demand rises as consumer income rises; positive income elasticity of demand so as consumers’ income rises more is demanded at each price. These goods shift to the right as income rises.

Answer 16

Normal Goods

Question 17

As income rises, the proportion spent on cheap goods will reduce as now they can afford to buy more expensive goods.

Answer 17

YED is positive

Question 18

– the demand decreases when consumer income rises; demand increases when consumer income decreases)

Answer 18

Inferior goods

Question 19

is he effect on the change in demand of one good as a result of a change in price of related to another product

Answer 19

Cross price elasticity of demand

Question 20

The measure of the responsiveness of quantity to a change in price. It is the percentage change in supply as compared to the percentage change in price of a commodity.

Answer 20

Price elasticity of supply (PES)

Question 21

If the cost of producing one more unit keeps rising as output rises or ____________ rises rapidly with an increase in output, the rate of output production will be limited.

Answer 21

Marginal Cost

Question 22

• Over time price elasticity of supply tends to become more elastic. The producers would increase the quantity supplied by a larger percentage than an increase in price.

Answer 22

Time

Question 23

• The larger the number of firms, the more likely the supply is elastic. The firms can jump in to fill in the void in supply

Answer 23

Number of firms

Question 24

If factors of production are movable, the price elasticity of supply tends to be more elastic. The labor and other inputs can be brought in from other location to increase the capacity quickly.

Answer 24

Mobility factors of production

Question 25

• If firms have spare capacity, the price elasticity of supply is elastic. The firm can increase output without experiencing an increase in costs, and quickly with a change in price

Answer 25

Capacity

Question 26

Determinants of Price Elasticity of Supply

Answer 26

MArginal Cost
Time
Number of Firms
Mobility of factors of production
Capacity