Pack 3 Flashcards
Explain what is meant by a rational consumer.
A rational consumer allocates their income to consuming goods and services that maximise their satisfaction.
Explain, using an example, what us meant by “effective demand”.
Demand for a good or service, backed up by the willingness to pay.
Draw a demand curve diagram to help you explain a contraction and extension in demand.
Drawn: A contraction or demand should go along the existing demand curve and shouldn’t be a shift.
Explain, using an example, what is meant by utility, marginal utility and disutility.
Utility = gaining satisfaction from the consumption of goods and services.
Marginal utility = this is the change in total utility resulting from the consumption of one more unit of good.
Disutility = The marginal utility becomes negative.
State 5 factors which influence demand and shift the demand curve.
Income, changes in credit, advertising and branding, prices of substitutes, prices of complimentary goods.
Choose one factor of demand and explain how it could increase demand.
If a price of a complimentary good decreases, more people will buy this good as they’ll need it when they buy the other good so demand for this good increases.
Choose another factor of demand and explain how it could decrease demand.
If the price of a substitute good decreases, more people will want to buy that so demand for this good decreases.
Show a shift left and right in the demand curve.
The demand curve shifts left, down the x axis. The demand curve shifts right, along the x axis.
What is the formula for revenue? Show the revenue diagram on a demand and supply diagram.
Revenue = price x quantity sold
Using a diagram, explain contractions and extensions in supply.
Drawn: A contraction or extension should go down or along the supply curve, there’ll be no shift.
Show a supply curve shifting left and right and give a factor which could have caused either shift.
If the government adds an indirect tax for a good, the supply curve will shift left as there is less incentive to supply that good.
Outline atleast 4 conditions that influence supply.
Improvements in technology, cost of raw materials, labour costs, subsidies.
