Market Flashcards
1
Q
What factors lead to a change in demand?
A
- Changes in prices of substitutes and complementary goods
- changes in consumer incomes
- fashions, tastes and preferences
- advertising and branding
- demographics
- external shocks
- seasonality
2
Q
What are factors leading to changes in supply?
A
- Changes in the costs of production
- Introduction of new technology
- Indirect taxes
- Government subsidies
- External shocks
3
Q
How do you calculate price elasticity of demand?
A
% change in price
4
Q
How price elastic is demand if:
- PED : 1
- PED > 1
- PED < 1
A
- PED : 1 means unit elasticity
- PED > 1 means price elastic
- PED < 1 means price inelastic
5
Q
How do you calculate income elasticity of demand?
A
% change in income
6
Q
How income elastic is demand if:
- YED > 1
- YED < 1
- YED +
- YED -
A
- YED > 1 ; elastic
- YED < 1 ; inelastic
- YED + ; normal good
- YED - ; inferior good
