Econs promos knowledge Flashcards
What are the determinants of demand?
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
What are the determinants of supply?
TIGERSO
1. Technology
2. input prices
3. government policies
4. expectations of price
5. related goods
6. sellers (number of)
7. other determinants
What are the MPB and MPC for producers and consumers?
producers: MPB is money earned; MPC is cost of production
consumers: MPB is the values of the benefit; MPC is the price sold
What is the definition of PED?
it measures the responsiveness of quantity demanded of a good to a change in price, ceteris paribus
what is the formula to calculate PED?
percentage change in qd divided by percentage change in px
What does it mean when PED is greater or below 1?
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
What are the determinants of PED?
number and closeness of substitutes
the proportion of income spent
degree of necessity of product
adjustment time period
What is the definition of Income Elasticity Demand (YED)?
it measure the responsiveness of the demand of a good given a change in consumers income level, ceteris paribus
how to calculate YED?
percentage change in qd divided by the percentage change in income
what does it mean when YED is less than 0, between 0 and 1 and greater than 1?
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
What are the determinants of YED?
- degree of necessity
- consumers income level
- cultural consideration
what is the definition of Cross Elasticity Demand (XED)?
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
How to calculate XED?
percentage change in qd of gd x divided by the percentage change in px of gd y
what does it mean when the XED is less than 0, equal to 0 and greater than 0?
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
What are the determinants of XED?
- closeness of substitutes/complements
What curves do PED, YED, XED and PES affect?
PED: SS curve
YED + XED: DD curve
PES: DD curve
what is the definition of PES?
measures degree of responsiveness of quantity supplied of a good given a change in price, ceteris paribus
how to calculate PES?
percentage change in qs divided by percentage change in px
what does it mean when PES less than 1 and greater than 1?
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
what are the determinants of PES?
- length and complexity of production process
- availability of spare capacity/inputs
3.level of stocks - adjustment time period
What are the characteristics of a public good?
1: non-excludability
2. non-rivalry
3. non-rejectability
what are the sources of market failure?
- information failure
- positive/negative externalities
- public goods
what are the limitations of government intervention when producing public goods?
- government may not produce at socially efficient output due to lack of information
- government may over-produce to win the popular vote
what must we define to state an example of positive externalities?
definite the MPB, MEB and 3rd parties
