As Revision Guide

Question 1

positive statement

Answer 1

based on facts, can be tested as true or false

Question 2

normative statement

Answer 2

opinion or value judgement

Question 3

allocative efficient

Answer 3

goods and services are optimal distributed

Question 4

Derived demand

Answer 4

demand of one good depends on the demand for another good

Question 5

Composite demand

Answer 5

multiple different uses (wheat for bread/wheat for biofuel)

Question 6

Joint demand

Answer 6

Two goods are complementary and needed together

Question 7

Price elasticity of demand

Answer 7

Measures the responsiveness of demand to a change in price

Question 8

calculate PED

Answer 8

% change in Q.D / % change in price

Question 9

Characteristics of elastic demand

Answer 9

Frequently bought, luxury goods, competitive markets

Question 10

Characteristics of inelastic demand

Answer 10

Few substitudes, Necessities, Addictive, Small percentage of income

Question 11

What kind of elasticity is admirable for companies?

Answer 11

Inelastic demand, because they can rise prices without losing too much Q.D

Question 12

Income elasticity of demand

Answer 12

measures the responsiveness of demand to changes in income

Question 13

Calculate income elasticity

Answer 13

% Change in Q.D / % Change in Income

Question 14

Types of goods

Answer 14

Inferior goods, normal goods, luxury goods, income inelastic

Question 15

Inferior goods

Answer 15

Increase in income leads to an fall in demand

Question 16

Luxury goods

Answer 16

Increase in income leads to an bigger increase in demand

Question 17

Normal goods

Answer 17

Increase in income leads to an increase in demand

Question 18

Income inelastic

Answer 18

Increase in income leads to a smaller increase in demand

Question 19

Technical Economies of Scale

Answer 19

The use of specialist, often expensive capital eg. machines

Question 20

Economies of Scale

Answer 20

Economies of Scale occur when there is a decrease in Average Total cost as the scale of production increases.

Question 21

Tragedy of commons

Answer 21

Common goods are often misused and exploited