Basics

Question 1

What are the five forces

Answer 1

1. Barriers to entry
2. Power of suppliers
3. Rivalry
4. Substitutes and complements
5. Power of buyers

Question 2

what is marginal analysis

Answer 2

examining the benefits of the activity compared to the additional costs incurred by that same activity

Question 3

What are demand shifters

Answer 3

1. Income
2. Prices of related goods
3. advertising and consumer tastes
4. population
5. consumer expectation

Question 4

what is total consumer value

Answer 4

sum of the maximum amount a customer is willing to pay at different quantities

Question 5

what is consumer surplus

Answer 5

the extra value that consumers derive from a good but do not pay for

Question 6

what is the market supply curve

Answer 6

the relationship between total quantity all producers are willing and able to produce at alternative prices, holding other factors affecting supply constant

Question 7

What are demand shifters

Answer 7

1. Income - normal/inferior
2. Price of related goods - substitute/complement
3. Advertising and consumer tastes - informative/ persuasive
4. Population
5. consumer expectations

Question 8

what are supply shifters

Answer 8

1. Input Prices
2. Technology or government regulations
3. No. of firms - entry or exit
4. Substitutes in production
5. taxes
6. Producer expectations

Question 9

what is the price ceiling

Answer 9

the maximum legal price that can be charged in a market - rent control

Question 10

what is the price floor

Answer 10

the minimum legal price that can be charged in a market

Question 11

Examples of Price ceiling

Answer 11

1. Crude oil by the US in the 1970s

2. Cement in dubai in 2008

Question 12

Example of price floor

Answer 12

minimum wage

Question 13

what is own price elasticity

Answer 13

the responsiveness of a percentage change in the quantity demanded of good x to a percentage change in its price

Question 14

when is it unitary elastic

Answer 14

when total revenue is maximised

Question 15

what are the factors affecting own price elasticity

Answer 15

1. Availability of consumption substitutes - the more sub the more elastic/ demand for commodities tend to be more inelastic
2. Time/ Duration of purchase horizon - demand tends to be more inelastic in SR/ the more time consumers have to react to a price change the more elastic the demand for the good (time allows to seek out available substitutes)
3. Expenditure share of consumers budget - essential goods are generally inelastic

Question 16

how is elasticity and marginal revenue connected

Answer 16

Marginal revenue measures the additional revenue due to a change in output

Question 17

What is optimal pricing policy

Answer 17

when MR = MC

Question 18

What is cross price elasticity

Answer 18

measure of responsiveness of a percentage change in demand for good x due to a percent change in the price of good y

Question 19

what is income elasticity

Answer 19

the responsiveness of a percent change in demand for good x due to a percent change in income

Question 20

what are other examples of elasticities

Answer 20

1. own price elasticity

2. cross-advertising elasticity

Question 21

How do you obtain information on the demand function

Answer 21

1. Published studies
2. Hire a consultant
3. Regression analysis using data on quantity, price, income and other important variables

Question 22

What is r-square (coefficient of determination

Answer 22

fraction of the total variation in the dependent variable that is explained by the regression

Question 23

What is adjusted r-square

Answer 23

a version of the r-square that penalise researchers for having few degrees of freedom

Question 24

what is the F-statistic

Answer 24

the measure of the total variation explained by the regression relative to the total unexplained variation

1. the greater the f-stat, the better the overall regression fit
2. equivalently, the p-value is another measure of the f-statistic but the lower the value associated with better overall regression fit

Question 25

What other settings can regression techniques be used?

Answer 25

Nonlinear functional relationships and functional relationships with multiple variables (not sure if need to learn formula)