Book 1 Part 2 Flashcards
Market equilibrium
A situation that occurs in a market where quantity demanded is exactly balanced to supply
Excess supply
Quantity supplied is higher than the quantity demanded at the price
Excess demand
Quantity consumers are willing to demand at the going price exceeds the supply
PED=
%Change in QD / %change in price
Any PED greater than -1 is _____
Elastic
Any PED between 0 and -1 is _____
Inelastic
What is unit elastic PED
When PED = -1
Income elasticity of demand=
%Change in QD / %change in income
YED Value table
Below -1 = inferior good- Elastic YED
-1 — 0 = Inferior good- Inelastic YED
0 = No link
0 — 1 = Normal good- Elastic YED
Above 1 = Superior good- Elastic YED
National minimum wage
Minimum pay per hour most workers under the age of 23 are entitled to by law
National living wage
The minimum pay per hour most workers over the age of 23 are entitled to by law
Cross elasticity of demand & formula
A measure of the sensitivity of QD to a change in price of some other good or service.
XED= %change in QD of good A / %change in price of good B
XED for Close substitutes
XED will be high such as 5, small rise in price means a larger rise in demand
XED for weak substitutes
XED would be low such as 0.5, large rise in the price of A leads to a small rise in the demand of B
XED for substitutes is ______
Positive
XED for close complements
XED would be high negative, such as -5, small fall in the price of one causes a large rise in demand for another
XED for weak complements
XED will be a low negative, such as -0.5, as a large fall in the price of one cause a small rise in the demand of another
XED for unrelated goods is ____
0
Loss leader
Product sold below market cost to stimulate other sales
