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Economics OCR Alevel > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

What does the term elastic mean

A

When PED is less than -1, very responsive to changes in price.

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2
Q

What does the term inelastic mean

A

When the PED is 0- (-1), not as responsive to changes in price

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3
Q

What does PED stand for

A

Price Elasticity of Demand

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4
Q

What is the formula for PED

A

%change in quantity demanded / %change in price

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5
Q

A steep gradient means

A

inelastic

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6
Q

A steady gradient means

A

elastic

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7
Q

What is PEDs definition

A

a measure of the sensitivity of quantity demanded to a change in the price of a good/service

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8
Q

What does the PED value of (-1- 0) mean

A

Inelastic

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9
Q

What does the PED value of (<-1) mean

A

Elastic

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10
Q

What does the PED value of (-1) mean

A

Unit Elastic -

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11
Q

Will the PED always be negative? True or False

A

True - because the demand curve is downward sloping

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12
Q

Why PED is important to firms?

A

If the firm is considering changing its prices, it will tell them the extent to which demand will be affected

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13
Q

For PED unit elastic: If price increases, total revenue would….. For a price decreases, total revenue ……

A

Does not change, Does not change

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14
Q

Factors that influence PED

A

Substitutes
Percentage of income
Luxury or necessity
Addiction
Time
(SPLAT)

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15
Q

What does YED stand for

A

Income Elasticity of Demand (YED)

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16
Q

What is the definition of YED

A

A measure of the sensitivity of quantity demanded to a change in consumer incomes

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17
Q

What is the formula for YED

A

%change in quantity demanded / %change in consumer income

18
Q

What does the YED value of (<-1) mean

A

Elastic inferior good

19
Q

What does the YED value of (-1 - 0) mean

A

Inelastic inferior good

20
Q

What does the YED value of (0 - 1) mean

A

Inelastic normal good

21
Q

What does the YED value of (>1) mean

A

Elastic Luxury(Normal) good

22
Q

YED helps firms as it can

A

Reduce information failure, Allows for more rational decision making. Helps forecast changing demand if incomes rise or fall - knowing what type of good is useful

23
Q

What does XED stand for

A

Cross Elasticity of Demand

24
Q

What is the definition of XED

A

a measure of the sensitivity of quantity demanded of a good or service to a change in price of some other good or service

25
Q

What does the XED value of (<-1) mean

A

Strong complement

26
Q

What does the XED value of (-1 - 0) mean

A

Weak complement

27
Q

What does the XED value of (0 - 1) mean

A

Weak substitute

28
Q

What does the XED value of (>1) mean

A

Strong substitute

29
Q

What does the XED value of (0) mean

A

No relationship

30
Q

What does PES stand for

A

Price Elasticity of Supply

31
Q

What is the definition of PES

A

a measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service

32
Q

PES is always positive? True or False

A

True

33
Q

What does the PES value of (>1) mean

A

Elastic

34
Q

What does the PES value of (0 - 1) mean

A

Inelastic

35
Q

What does the PES value of (1) mean

A

Unitary elastic

36
Q

What does the PES value of (0) mean

A

Perfectly inelastic

37
Q

What does the PES value of (infinity) mean

A

Perfectly elastic

38
Q

What does a perfectly inelastic supply mean

A

a situation in which firms can supply only a fixed quantity, so cannot increase or decrease the amount available; elastic of supply is 0

39
Q

What does a perfectly elastic supply mean

A

a situation in which firms will supply any quantity of a good at a going price; PES value is infinite

40
Q

How does XED help firms

A

Helps to anticipate changing demand if prices of other products change. Helps firms be aware of close substitutes and complements therefore who their competitors are

Economics OCR Alevel (39 decks)

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