Economics- Price determination in a competitive market

Question 1

What are examples of inferior goods?

Answer 1

Baked beans, betting shops

Question 2

How can you tell if a good is a normal good?

Answer 2

When it’s YED is positive

Question 3

PED

Answer 3

The responsiveness of demand to changes in price

Question 4

YED

Answer 4

The responsiveness of demand to changes in income

Question 5

XED

Answer 5

The responsiveness of the demand of one good to a change in price of another good.

Question 6

PED Equation

Answer 6

Δ Demand/ Δ Price

Question 7

YED Equation

Answer 7

Δ demand/Δ income

Question 8

XED Equation

Answer 8

Δ demand of good 1/ Δ price of good 2

Question 9

Normal good

Answer 9

A good whose demand increases as income increases

Question 10

What would a demand curve signify if it had a steep gradient

Answer 10

It is inelastic

Question 11

inferior good

Answer 11

A good whose demand increases as income decresaes

Question 12

Elastic

Answer 12

When a good’s demand can easily change when its. price changes

Question 13

What is the term for when a good’s elasticity is 1?

Answer 13

Unit elastic

Question 14

Inelastic

Answer 14

When a good’s demand can’t easily change as much when there’s a change in price

Question 15

Veblen good

Answer 15

A type of luxury good whose demand increases as price increases

Question 16

Factors that affect elasticity

Answer 16

The amount of alternatives to the product

Question 17

Factors that affect elasticity

Question 18

Is a PED of 0.5 elastic?

Answer 18

No

Question 19

Is a PED of 1.75 elastic?

Answer 19

Yes

Question 20

What is the PED if the price increases from £1 to £1.50 and demand decreases from 5000 to 4100 units? Is it elastic or inelastic?

Answer 20

0.36, inelastic

Question 21

Revenue

Answer 21

the amount of money a business gets from selling its products

Question 22

How can you tell an inferior good from its YED

Answer 22

When it’s YED is negative

Question 23

What is the XED if the price of peaches rise from £1 per pack to £1.49 per pack and the demand for nectarine s go from 15 000 units to 25 000 units? Give your answer to 2 significant figures.

Answer 23

1.4

Question 24

PES

Answer 24

The responsiveness of quantity supplied to a change in price

Question 25

If the price of cereal increased, how would cereal suppliers react? Why?

Answer 25

They would increase the amount of supply of cereal. Because they can make more money per unit

Question 26

Revenue equation

Answer 26

Qty sold X price