Chap 3 Flashcards
What is PED
Price eleasticity of demand
- how price sensitive demand for a product is
Difference between Point Ped and Arc ped
point ped = ped at that point
arc ped = av ped between two points
What is inelastic demand?
<> UP UP
PED <1
Change in P > change in Q
Increase price, Increase overall revenue
essential purchases
What is elastic
> < UP DOWN
PED > 1
Change in P < Change in Q
Increase price, decrease overall revenue
Luxury
Factors that effect PED
N. of close substitutes - more elastic - if P increases people switch
Switching - high cost = inelastic
Luxury
Percetage of income - high percent - more elastic
Time - more time to respond - more elastic - can switch
Habit - more inelastic
peak - inelasitic - off peak - elastic
Definition - broad inelastic - specific elastic
SSLPTHPD
Secret service love putting the holiday party down
In a straight line curve - what is the PED left to right
y intercepy
PED = infinity - Perfectly elastic
Relatively elastic PED >1
Unitary PED = 1
Relatively inelastice PED < 1
PED = 0 perfectly inelastic - x intercept
What is PES
Price elasticity of Supply
-how quantity of supply is changed in respect to price of that good
Factors that effect PES
SETS
Spare capacity - elastic
Ease of factor substitution -
Time period - longer time - more elastic
Stocks - high stocks of materials etc - elastic
What is an externality
Any impact on any 3rd part not involved in transaction
demerit - bad
merit good
gov tax/regulate
D inelastic - more to consumer
S elastic - more to consumer
What is a public good
A good that would not be provided in a market economy
-non excludability/nondiminishability
What are Barriers to entry? And E.g.s
A factor that makes it hard to enter a market
PALE
Product differentiation - more special - new comp cant compete/gain share by low prices
Absolute cost advantage - more established, decreased costs
Legal barriers - Patent or gov protention
Economies of Scale
Economies of scale
as a business grows in size, EOS on their side
Internal
Trading - bulk buying
Technical - better tech
Financial - cheaper costs on loans
management - specialised
External -due to general growth of industry - skilled staff/infrastructure
To large - problems arise
Perfect competition
No consumer or producer has market power to influence prices ‘PAH FIE’
Perfect and complete info -
Atomicity - large number of small producers
Homogenity - no product differentiation
Free entry - any firm can enter/exist as they wish
Independence - no scope for people to come together to change price
Equal access - to tech, and resources are mobile
for externalitites for tax and subsidy - who bears more of the brunt?
Demand inelastic or supply elastic - consumer DISEC
demand elastic or supply inelastic - supplier
what are the conditions for an oligopoly
few suppliers only
-effective barriers to entry
interdependence between market participants
collusive (cartel) or non collusive
firms do not compete on price
product differentiation strong
outsourcing vs off shoring
outsourcing - getting someone else to do particular activities and functions
off shoring moving a part or whole of a business to a cheaper area
e-business: elasticity
demand: elastic - people can easily go and find others
supply elastic: low vcpu
what are transaction costs
-search and info
-bargaining and decision
-policing and enforcing
any cost that isnt a production cost
What effects a transaction cost
frequency - higher = higher cost
asset specifity - more = inhouse
uncertainty
company size smaller may outsource more
What is a SSC?
shared service center
provides services to the rest of an entity
Network organisation
horizontal structure less chain of command
outsourcing likely
flexible staffing
take on lots of contracted workers etc uber
bad for workers rights
