Micro Flashcards
What Is The Basic Economic Problem
Everyone Has unlimited needs and wants but there are limited resources so not every demand can be reached
What Are The 3 Types Of Markets
1) Free Market ( e.g. USA)
2) Mixed Economy (e.g. UK)
3) Planned Economy (e.g. Russia)
What Happens If There Is A Change In Price
A change in price of a product causes a movement along the curve.
What Causes A Shift In The Demand Graph
1) Change in price of a substitute
2) Change in price of a compliment
3) Seasonality
4) Population
5) Income
6) Interest Rates
7) Advertising
What Causes A Shift In The Supply Curve
1) Wages
2) Materials
3) Taxes / Subsidies
4) Food
5) Technology
What Is A Supply Curve
The amount that firms are willing to supply at a given price
What Does Price Elasticity Of Demand Mean
The responsiveness of demand to changes in price.
What is the formula for Elasticity
%Change In Quantity Demanded
PED = ——————————————————–
% Change In Price
What Is Ceteris Paribus
Everything is always Equal.
What is the meaning of “Time Period”
The longer the time under consideration a more elastic product is likely to be.
What does Habit Forming Mean?
Getting addicted to something for example Drugs, Alcohol and Cigarettes.
Formula for Elasticity Of Supply
% Change In Price
Meaning of Elasticity of supply.
How responsiveness supply is when price is changed.
What does Inelastic Supply Mean
If the product is Inelastic then the change in price wouldn’t considerably affect supply
What does Elastic Supply Mean
A change in price would lead to a high change in supply
Name Some Factors That Effect Elasticity Of Supply
Spare Production Capacity
Stocks of finished products and components
Cost of Factor substitution
Time Period and Production Speed
Income Elasticity Of Demand
The Responsiveness of demand to changes in Income
Formula For Inelasticity Of Demand
% Change In Income
What is a Normal Good
Demand Rises as income rises and vise versa
What is a Inferior Good
Demand Falls as income rises and vise versa
What does cross elasticity of demand mean?
The Responsiveness Of Demand(A) In A Change In Price(B)
OR The responsiveness of good A when the price goes up For Price B
What Does a Normative Statement Mean
Those Which Give Value Based And Involve Options
What Does a Positive Statement Mean
A Statement Which Can Be Supported With Evidence and Facts
What Does PPF Mean
Production Possibility Frontier - the production possibility frontier (PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources
What is Specialization
A Method of production whereby an entity focuses on the production of a limited scope of goods
