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Econ > Chap 2.2 > Flashcards

Chap 2.2 Flashcards

1
Q

whats demand

A

consumer must be willing and able to purchase the
commodity, which they desire. Their desire should be backed by his/her purchasing power.

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2
Q

whats the law of demand

A

states that,
price of a commodity and its quantity demanded are inversely related

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3
Q

what are the 2 factors of demand for a good

A

price factors and non price factors

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4
Q

what are non price factors

A

i. Price of the product
ii. Taste or preference of consumers
iii. Income of the consumers
iv. Price of related goods
v. Consumers expectation of income and price
vi. Number of buyers in the market

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5
Q

what things determine demand

A
  • taste/ preference
  • income demand
  • cross demand
  • consumer expectation of income and price
  • number of buyer in the market
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6
Q

what cause movement in demand curve (quantity demand)

A

a fall or raise in price leads to a raise or fall in quantity demand

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7
Q

whats an extension of demand

A

downward movement along the demand curve

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8
Q

whats a contraction of demand

A

Upward movement along the demand curve

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9
Q

what causes a shift in demand curve (demand)

A

it occurs due to other factors rather than the price of a given commodity

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10
Q

what indicates increase in demand

A

Rightward shift in the demand curve

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11
Q

what indicates a decrease in demand

A

Leftward shift in demand curve

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12
Q

whats elasticity

A

its a measure of responsiveness of a dependent variable to
changes in an independent variable.

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13
Q

whats elasticity of demand

A

refers to the degree of responsiveness of
quantity demanded of a good to a change in its price, or change in
income, or change in prices of related goods

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14
Q

what are the 3 kinds of demand elasticity

A

price, income and cross

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15
Q

what does price elasticity mean

A

Means the degree of responsiveness of demand to change in price

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16
Q

what are the 2 ways to measure price elasticity in demand

A

point and arc elasticity

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17
Q

perfectly inelastic

A

change in price doesnt affect demand at all

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18
Q

inelastic

A

change in demand is less than change in price

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19
Q

unit elastic

A

chnages in demand and price are equal

20
Q

elastic

A

change in demand in more than prices

21
Q

perfectly inelastic

A

demand changes infinitely

22
Q

what determines the price of elasticity of demand

A
  • availability of subs
  • time
  • the proportion of income consumers spend for a product
  • ## importance of the commodity in the consumers budget
23
Q

whats an income elasticity of demand

A

is a measure of the responsiveness of quantity demanded to changes in income assuming all other things, including price, constant.

24
Q

whats corss price of elasticity of demand

A

Its the responsiveness of quantity demanded for one commodity to
the changes in the prices of other commodities,

25
Q

whats the cross–price elasticity of demand for substitute goods

A

positive

26
Q

whats the cross–price elasticity of demand for complementary goods

A

negative

27
Q

whats the cross–price elasticity of demand for unrelated goods

A

zero

28
Q

whats supply

A

indicates various quantities of a product that sellers are willing and able to provide at different prices in a
given period of time, other things remaining unchanged.

29
Q

whats the law of supply

A

as price of a product
increase, quantity supplied of the product increases. there is a positive relationship between price and quantity supplied.

30
Q

what is supply determined by

A

 price of inputs ( cost of inputs)
 technology
 prices of related goods
 seller’ expectation of price of the product
 taxes & subsidies
 number of sellers in the market
 weather, etc.

31
Q

whats elasticity of supply

A

It is the degree of responsiveness of the supply to change in price.

32
Q

The supply is elastic when…

A

when a small change on price leads to great
change in supply.

33
Q

supply is inelastic or less elastic when…

A

when a great change in price induces only a
slight change in supply.

34
Q

supply is unitary elastic

A

when a change in price induces a change in supply in the same amount

35
Q

the supply is perfectly inelastic when…

A

a change in price does
not induces a change in supply

36
Q
A
37
Q

the supply is perfectly elastic when…

A

a change in supply
does not induces a change in price

38
Q

what are determinants of price elasticity supply

A
  • how costs behave as output is varied
    -time involved
    -excess capacity and unsold stocks
39
Q

whats market equilibrium

A

Market equilibrium occurs when market demand equals market
supply

40
Q

what happens when demand changes and supply remains constant

A

Supply being given, an increase in demand increase both the
equilibrium price and the quantity and vice versa.

41
Q

what happens when supply changes and demand remains constant

A

Demand being given, an increase in supply increase the equilibrium
quantity and decrease equilibrium price and vice versa.

42
Q

what happens if theres a combined increase in demand and supply

A

the quantity of the product will increase definitely. then the price remains the same.

43
Q

combined decrease in demand and supply

A

the quantity decreases, But the change in price will depend upon the relative fall in demand and supply.

44
Q

whats a maximum price fixation

A

its fixing the maximum price because there was an increase in demand which lead to a rise in prices

45
Q

whats a minimum price fixation

A

its fixing a minimum price because demand has been less than supply

Econ (9 decks)

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