Chapter 2 Flashcards
1
Q
Law of demand
A
D Curve is negatively sloping to show that price and quantity are inversely related
2
Q
Factors that shift D
A
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- income
- substitutes
- compliments
- advertising
- population
- taste and fashion
- credit facilities
- income tax
3
Q
Factors that shift supply
A
CCSTW
- changes in CoP
- changes in taxes
- subsidies
- technology
- weather
4
Q
Factors affecting PED
A
- availability of substitutes
- luxury vs necessity
- portion of income spent on product
- habits and addiction
- brand loyalty
- time
- breadth of definition
- durability
5
Q
Factors affecting PES
A
- time period
- availability of resources
- shelf life
- number of producers
- improvement in tech
6
Q
Market faliure
A
faliure to take social benefit or cost into consideeration
- public goods(non excludable and non rival)
- merit goods
- demerit goods
- abuse of monopoly power
- factor immobility
7
Q
Adv of government interference
A
- takes into consideration SC & SB
- encourage consumption of merit goods
- can discourage consumption of demerit goods
- prevent monopoly using regulations
- can help redistribute income
8
Q
How can gov correct market failure
A
- indirect tax
- subsidy
- regulations
- education and advertising
- privatization and nationalization
- gov provision(e.g. public goods & free education)
9
Q
Adv of privatization
A
- firms more efficient due to inc competition
- inc consumer choice, large variety
- inc gov rev
10
Q
DisAdv of privatization
A
- lack of competition may cause monopoly, inc prices, lower quality
- ignore SB & SC
