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[9570] J2 Economics > Econs promos knowledge > Flashcards

Econs promos knowledge Flashcards

1
Q

What are the determinants of demand?

A

TIGERSIP
1. tastes and preferences
2. income change
3. government policies
4. expectations of price, income, others
5. related goods
6. seasonal factors
7. interest rate/ease of credits
8. population size + composition

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2
Q

What are the determinants of supply?

A

TIGERSO
1. Technology
2. input prices
3. government policies
4. expectations of price
5. related goods
6. sellers (number of)
7. other determinants

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3
Q

What are the MPB and MPC for producers and consumers?

A

producers: MPB is money earned; MPC is cost of production
consumers: MPB is the values of the benefit; MPC is the price sold

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4
Q

What is the definition of PED?

A

it measures the responsiveness of quantity demanded of a good to a change in price, ceteris paribus

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5
Q

what is the formula to calculate PED?

A

percentage change in qd divided by percentage change in px

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6
Q

What does it mean when PED is greater or below 1?

A

greater than 1: a change in price will lead to a more than proportionate change in quantity demanded

less than 1: a change in price will lead to a less than proportionate change in quantity demanded

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7
Q

What are the determinants of PED?

A

number and closeness of substitutes
the proportion of income spent
degree of necessity of product
adjustment time period

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8
Q

What is the definition of Income Elasticity Demand (YED)?

A

it measure the responsiveness of the demand of a good given a change in consumers income level, ceteris paribus

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9
Q

how to calculate YED?

A

percentage change in qd divided by the percentage change in income

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10
Q

what does it mean when YED is less than 0, between 0 and 1 and greater than 1?

A

less than 0: the good is an inferior good (goods with better quality subs are available)

between 0 and 1: the good is a necessity

greater than 1: the good is a luxuries

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11
Q

What are the determinants of YED?

A
  1. degree of necessity
  2. consumers income level
  3. cultural consideration
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12
Q

what is the definition of Cross Elasticity Demand (XED)?

A

measures the degree of responsiveness of demand of a good given a change in price of another good, ceteris paribus

NOTE: it’s XED BETWEEN 2 goods, not XED of a good

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13
Q

How to calculate XED?

A

percentage change in qd of gd x divided by the percentage change in px of gd y

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14
Q

what does it mean when the XED is less than 0, equal to 0 and greater than 0?

A

less than 0: the 2 goods are complements
equal to 0: the 2 goods are unrelated
greater than 0: the 2 goods are perfect substitutes

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15
Q

What are the determinants of XED?

A
  1. closeness of substitutes/complements
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16
Q

What curves do PED, YED, XED and PES affect?

A

PED: SS curve
YED + XED: DD curve
PES: DD curve

17
Q

what is the definition of PES?

A

measures degree of responsiveness of quantity supplied of a good given a change in price, ceteris paribus

18
Q

how to calculate PES?

A

percentage change in qs divided by percentage change in px

19
Q

what does it mean when PES less than 1 and greater than 1?

A

less than 1: a change in price leads to a less than proportionate change in qs

more than 1: a change in price leads to a more than proportionate change in qs

20
Q

what are the determinants of PES?

A
  1. length and complexity of production process
  2. availability of spare capacity/inputs
    3.level of stocks
  3. adjustment time period
21
Q

What are the characteristics of a public good?

A

1: non-excludability
2. non-rivalry
3. non-rejectability

22
Q

what are the sources of market failure?

A
  1. information failure
  2. positive/negative externalities
  3. public goods
23
Q

what are the limitations of government intervention when producing public goods?

A
  1. government may not produce at socially efficient output due to lack of information
  2. government may over-produce to win the popular vote
24
Q

what must we define to state an example of positive externalities?

A

definite the MPB, MEB and 3rd parties

25
Q

what are the 8 steps to explain positive externalities leading to market failure?

A
  1. define positive externalities
  2. use an example if no context
  3. identify the MPB, MEB and 3rd parties
    4: since MSB = MPB + MEB, MSB will be higher than MPB
  4. draw the graph and assume absence of negative externalities
  5. identify free market equilibrium quantity (MPB = MPC)
  6. identify socially efficient equilibrium quantity
  7. since qm < qs, under-production + under-consumption. societal welfare can be increased
26
Q

What are the solutions to positive externalities?

A
  1. grants (benefits consumers)
  2. legislation
  3. moral suasion
  4. indirect subsidies (benefit producers)
  5. government supplement
27
Q

What are the limitations of solutions to positive externalities?

A
  1. difficult to estimate and too much will worsen societal welfare, leading to government failure
  2. strain budget
  3. for legislation, need monitoring
  4. moral suasion is voluntary
28
Q

What are the solutions to negative externalities and which one of them decreases supply and decreases demand?

A

decrease supply:
1. indirect taxes
2. cap and trade
3. legislation
a. Output Quota
b. Banning
4. Nationalisation

decrease demand:
1. moral suasion

29
Q

What are the factors causing information failure?

A
  1. ignorance
  2. complex info
  3. misleading info
  4. missing/incomplete info
    5 uncertainty about the future
30
Q

what are the solutions to information failure?

A
  1. moral suasion
  2. regulation/legislation/laws/guidelines
31
Q

What are the causes of asymmetric information?

A
  1. adverse selection
  2. moral hazard

[9570] J2 Economics (3 decks)

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