Micro

Question 1

PED>1?

Answer 1

Price elastic

Question 2

PED=1

Answer 2

Unitary elasticity (proportional change)

Question 3

Factors of PED?

Answer 3

Available substitutes
Proportion of income (more spent = more elas)
Time ( if bought every 2 years then more inelas)

Question 4

YED?

Answer 4

%^Y

Question 5

YED sign matters

Answer 5

-ve = inferior goods
\+ve= normal goods

Question 6

YED>1

Answer 6

Income elastic

Question 7

YED luxuries?

Answer 7

Relatively large YED (always positive)

Question 8

XED?

Answer 8

%change P good b

Question 9

XED sign matters

Answer 9

\+ve = substitutes 
-ve = complements 

Larger value = closer compliment / substitute

Question 10

PES?

Answer 10

%^ P

Question 11

PES>1

Answer 11

Elastic

Able to respond with change in supply if price changes

Question 12

PES =1

Answer 12

Change in price = change in demand (proportional)

Question 13

Determinants of PES?

Answer 13

-Availability of stocks 
(Price^ then stocks sold at high price)
(Price fall the stored and sold when P^)
-Availability of fops
(Spare capacity etc)

Question 14

Business significance of PED?

Answer 14

• pricing products

- maximise revenue ( if Inelastic then ^ supply)

Question 15

Business significance of YED

Answer 15

Forecasting future demand
Business prospects
Predict effect of recession or growth on demand for their product

Question 16

Business significance of XED?

Answer 16

If large + XED then lower price to steal market competition as close substitutes
If large -XED then prepare if complement price changes

Question 17

PES ALWAYS POSITIVE ( uses?)

Answer 17

Can prepare excess stock if expect a P^
Fops can be re allocated to respond to change in price (^ or decrease labour)
So they can aim for elastic supplies

Question 18

Calculate ped

Answer 18

%^P

Question 19

PED less than 1

Answer 19

Inelastic

Question 20

YED less than 1

Answer 20

Income Inelastic
Not very responsive to change in Y
(Change in Y > change in QD)

Question 21

PES less than 1

Answer 21

Price Inelastic

Question 22

Specialisation + benefits

Answer 22

Concentration of labour on a narrow range of g and s

• increased output
• ^ range of goods available in economy

Question 23

Specialisation - cons

Answer 23

• cheap imports lead to loss of jobs
• tastes and needs change, specific economy suffers
• finite resources run out = no trade

Question 24

Division of labour + -

Answer 24

Specialisation of labour- production process broken down into separate taks

• productivity^
• many workers low paid
• monotonous + boring =poor quality

Question 25

Free market

Answer 25

Resources allocated through market forces of D and S

Question 26

Command market

Answer 26

Most resources state owned + allocated centrally

Question 27

Mixed market -

Answer 27

combination of D and S market forces and state allocation of resources

Question 28

Determinants of Demand

Answer 28

Income 
Price of alternatives 
Tastes + fashion
Advertising 
Population size

Question 29

Determinants of supply

Answer 29

Cop
Size of industry 
Advancement in technology
Govt policy 
Other factors (hurricanes)