Price Determination

Question 1

Elasticity

Answer 1

The responsiveness of one variable in relation to another

Question 2

Price Elasticity Of Demand

Answer 2

The responsiveness of demand to a change in price

Question 3

Price Elastic

Answer 3

A change in price will lead to a more than proportional change in demand

Question 4

Price Inelastic

Answer 4

Change in price will lead to a less than proportional change in demand

Question 5

Perfectly Elastic

Answer 5

Could not increase price as there would be no demand

Question 6

Perfectly Inelastic

Answer 6

The firm could charge as high a price as it wanted

Question 7

Determinants Of Price Elasticity Of Demand

Answer 7

Availability of substitutes
Time
Definition of the market

Question 8

Income Elasticity Of Demand

Answer 8

The responsiveness of demand to a change in income

Question 9

Income Elastic

Answer 9

Change in income will lead to a more than proportional change in demand

Question 10

Income Inelastic

Answer 10

Change in income will lead to a less than proportional change in demand

Question 11

Determinants Of Income Elasticity Of Demand

Answer 11

Necessity or luxury
Level of income of a consumer
Standards of living
The economic cycle

Question 12

Cross Elasticity Of Demand

Answer 12

The responsiveness of demand for one good to a change in price of another good

Question 13

Cross Elastic

Answer 13

Change in price of one good will lead to a more than proportional change in demand of another good

Question 14

Cross Inelastic

Answer 14

Change in price of one good will lead to a less proportional change in demand of another good

Question 15

Determinants Of Cross Elasticity Of Demand

Answer 15

Substitutes

Complementary Good

Question 16

Supply

Answer 16

The amount of a good or service producers are willing and able to sell at any given price at a point in time

Question 17

Determinants Of Supply

Answer 17

Price of the good
Impact of changing costs of production
Technological progress
Prices of other goods/services
Government policy
Future expectations

Question 18

Price Elasticity Of Supply

Answer 18

Responsiveness of supply to a change in price

Question 19

Determinants Of Price Elasticity Of Supply

Answer 19

Price
Substitutes
Time

Question 20

Market Equilibrium

Answer 20

Point at which demand is equal to supply

Question 21

Equilibrium Price

Answer 21

All products sold as demand equals supply

Known as the market clearing price

Question 22

Commodity Market

Answer 22

Buyers and sellers come together to exchange homogenous products

Question 23

Hard Commodities

Answer 23

Commodities extracted from the ground

Question 24

Soft Commodities

Answer 24

Commodities that can be grown

Question 25

Buffer Stocks

Answer 25

Government intervention to reduce fluctuations in price and output

Question 26

Composite Demand

Answer 26

An increase in demand for one good or service will restrict its availability for another use

Question 27

Derived Demand

Answer 27

Demand for a product occurs as a result of demand for another good or service

Question 28

Joint Supply

Answer 28

Production of a product creates a by-product that can also be supplied