Flashcard Set 2
What are the five conditions on demand?
- Substitute goods
- Complementary goods
- Income
- Tastes and preferences
- Population size
What is specialisation?
Concentration on a task or product
What is the formula for Cross Price Elasticity (XED)?
% Change in price of GOOD B
What is the formula to work out Percentage Change?
Percentage Increase
—————————— X 100
Original Percentage
What is Absolute advantage?
The ability to produce a product using fewer resources.
What is Comparative advantage?
The ability to produce a product at a lower opportunity cost.
Output of Goods and Services =
Factor Inputs + Factor Productivity
What are Factor inputs?
Land, Labour, Capital & Enterprise
What is Factor Productivity?
Efficiency
What is Cross Price Elasticity of Demand (XED)?
XED measures responsiveness of demand for GOOD X following a change in the price of a related GOOD Y.
What are substitutes?
Products in competitive demand.
What happens if there is an increase in price of one good and there is a substitute/ rival product?
There will be an increase of demand for the rival product.
What is the Value of XED for two Substitutes?
Positive
What is the value of XED for two Compliments?
Negative
If the co-efficient of Price Elasticity of Demand <1 then demand is said to be…
Price Elastic
If the co-efficient of Price Elasticity of Demand >1 then demand is said to be…
Price Inelastic
If the co-efficient of Price Elasticity of Demand =0 then demand is said to be…
Perfectly Inelastic
If the co-efficient of Price Elasticity of Demand is INFINITY then demand is said to be…
Perfectly Elastic
On a graph, which axis does price always go?
Y axis.
What happens to the elasticity of products over time?
They become more elastic.
What is efficiency?
Making the best use of resources.
What is the formula for Price Elasticity of Demand?
% Change in Price
Price change gets X or / ?
X
Quantity demand gets X or / ?
/
What is consumer Surplus?
When a consumer has to pay less than they were originally anticipating to pay
State what Income Elasticity of Demand (YED) shows
Income Elasticity of Demand (YED) shows how responsive the demand for a product is to a change in (real) income.
What is the formula for Income Elasticity of Demand (YED)?
% Change in quantity demanded
YED = ————————————————
% Change in real income
What are the four main types of goods?
- Normal goods
- Luxury goods
- Necessities
- Inferior goods
