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AQA A-Level Economics Year 1 > Competitive Markets > Flashcards

Competitive Markets Flashcards

1
Q

What is a market?

A

A market is anywhere buyers & sellers can exchange goods & services

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2
Q

What is demand?

A

The quantity of a good or service that consumers are willing and able to buy at a given price in a given period of time

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3
Q

What does the demand curve show?

A

The relationship between price and quantity demanded

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4
Q

What does a decrease in price cause?

A

An extension in demand

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5
Q

What does an increase in price cause?

A

A contraction in demand

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6
Q

When does a demand curve shift?

A

When there is a change in quantity demanded but not price

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7
Q

What could shift a demand curve?

A

Population
Advertisement
Price of substitutes
Income
Fashion & tastes
Interest rates
Complementary goods’ price

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8
Q

What are substitute goods?

A

Goods that are alternatives to each other, when one increases in price its demand will decrease, but demand for the other good will increase

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9
Q

What are complementary goods?

A

Goods that are often used together, if price increases for one then the demand for both will decrease, because people don’t want one without the other

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10
Q

What is derived demand?

A

The demand for a good or service that is needed to make another good or service. For example demand for fencing will increase demand for wood

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11
Q

What is composite demand?

A

When a good can be used for more than one thing. For example, an increase in demand for a product may leads to a decrease in supply for another product

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12
Q

What is price elasticity of demand?

A

A measure of how quantity demanded for a good responds to a change price

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13
Q

What is the formula for PED?

A

% change in quantity demanded/ % change in price

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14
Q

If PED is between 0 and -1, how elastic is it?

A

It is inelastic

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15
Q

If PED is between -1 and ∞, how elastic is it?

A

It is elastic

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16
Q

What will PED always be less than?

A

0, it will always be negative

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17
Q

What shape is a perfectly elastic demand curve?

A

A straight horizontal line

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18
Q

What shape is a perfectly inelastic demand curve?

A

A straight vertical line

19
Q

What is income elasticity of demand?

A

A measure of how much the demand of a good changes with a change in real income

20
Q

What is the formula for income elasticity of demand?

A

% change in quantity demanded of a good/% change in real income

21
Q

What is the YED of an inferior good when it is elastic?

A

YED is between -∞ and -1

22
Q

What is the YED of an inferior good when it is inelastic?

A

YED is between -1 and 0

23
Q

What is the YED of a necessity good?

A

YED is between 0 and 1

24
Q

What is the YED of a luxury good?

A

YED is between 1 and ∞

25
Q

What is cross elasticity of demand?

A

A measure of how the quantity demanded of a good responds to a change in price of another good

26
Q

What is the formula for XED?

A

% change in quantity demanded of good A/ % change in price of good B

27
Q

What does a positive XED between two goods show?

A

They are substitute goods

28
Q

What does a negative XED between two goods show?

A

They are complementary goods

29
Q

What is supply?

A

The quantity of a good or service that producers supply to a market at a given price, in a specific period of time

30
Q

What does an increase in price show?

A

An extension in supply

31
Q

What does a decrease in price show?

A

A contraction in supply

32
Q

What are the causes of the supply curve shifting?

A

Productivity
Indirect tax
Number of firms
Technology
Subsidy
Weather
Costs of production

33
Q

What is joint supply?

A

When the production of one good or service involves the production of another good or service

34
Q

What is price elasticity of supply?

A

A measure of how the quantity supplied of a good responds to a change in its price

35
Q

What is the formula for PES?

A

% change in quantity supplied/% change in price

36
Q

What is the value of PES always between?

A

0 and infinity, it is always positive

37
Q

When is PES inelastic?

A

When it is between 0 and 1

38
Q

When is PES elastic?

A

When it is between 1 and infinity

39
Q

What is supply in the short run?

A

Price inelastic

40
Q

What is supply in the long run?

A

It is more elastic

41
Q

When is a market in equilibrium?

A

When supply equals demand

42
Q

Where is consumer surplus on the supply & demand diagram

A

Above the equilibrium price line

43
Q

Where is producer surplus on the supply & demand diagram?

A

Below the equilibrium price line

44
Q

What is a subsidy?

A

Money paid by the government to the producer of a good/service to make it cheaper than it would be normally

AQA A-Level Economics Year 1 (12 decks)

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