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Econ AQA Paper One > Price determination in a competitive market > Flashcards

Price determination in a competitive market Flashcards

1
Q

Define demand

A

The total quantity of a good or service that consumers are willing and able to purchase at any given time

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2
Q

Give 7 reasons for the demand curve shifting

A

Population
Income
Related goods
Adverts
Taste and fashion
Expectations
Seasons

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3
Q

What does the acronym PIRATES give

A

Reasons for the demand curve shifting

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4
Q

Give the formula for price elasticity of demand

A

PED=%▵QD
%▵P

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5
Q

Define an elastic good

A

A good that is very responsive to change in price
- a change in price leads to a bigger change in demand

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6
Q

Draw a diagram for a good at PED>1

A
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7
Q

What PED would a price elastic good have

A

A PED>1

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8
Q

Define a price inelastic good

A

Its demand is relatively unresponsive to a change in price

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9
Q

What PED would an inelastic good have

A

PED<1

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10
Q

Define what a unitary elastic good is

A

▵Demand=▵Price

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11
Q

What PED value would a unitary elastic good have

A

PED=1

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12
Q

Draw a unitary elastic good diagram

A
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13
Q

What happens to a perfectly inelastic good when price changes

A

The demand remains the same

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14
Q

Draw a perfectly price inelastic good diagram

A
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15
Q

Draw a perfectly elastic good diagram

A
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16
Q

What is the PED of a perfectly elastic good

A

PED= infinity

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17
Q

How does PED fall differently on consumers for elastic compared to inelastic goods

A

Indirect Taxes will be higher for inelastic goods as firms will put more of the tax burden due to the acknowledgement that price will not change demand

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18
Q

Draw a graph to show an indirect tax on an inelastic good including burdens

A

https://pmt.physicsandmathstutor.com/download/Economics/A-level/Notes/AQA/Microeconomics/3-Price-Determination-in-a-Competitive-Market/b)%20Price,%20income%20and%20cross%20elasticities%20of%20demand.pdf

19
Q

Outline the formula for income elasticity of demand(YED)

A

YED=%▵QD
%▵Y

20
Q

Explain what an inferior good is

A

They see a fall in demand as income increases.EG Tessie PB

21
Q

What would the value of YED be for an inferior good

A

YED<0

22
Q

Describe what a normal good is

A

Demand increases along with Income

23
Q

What would the value of YED be for a normal good

A

YED>0

24
Q

Describe what a luxury good is

A

A good thats demand increases significantly as income increases

25
Q

What would the YED value be for a luxury good

A

YED>1

26
Q

Give the formula for cross elasticity of demand

A

XED=%▵QD of good A
%▵P of good B

27
Q

What does cross elasticity of demand measure

A

how responsive the change in demand for one good is to the price of another

28
Q

What goods have negative XED values

A

Complements

29
Q

Draw a graph to show two goods that are complementary( strong and weak complementary)

A

..

30
Q

What would the XED value of an unrelated good be

A

0 as there is no correlation

31
Q

Define supply

A

The quantity of a good or service that a producer is willing and able to supply at any given moment at a given price

32
Q

Name the 7 factors that affect supply

A

Productivity
Indirect taxes
Number of firms
Subsidies
Weather
Cost of production

33
Q

Define price elasticity of supply

A

The responsiveness of a chnage in supply to a change in prrice

34
Q

Give the formula for calculating PES

A

PES= %▵QS
%▵P

35
Q

What does elastic supply mean

A

Supply can be changed quickly at little cost

36
Q

What would the numerical value for an inelastic supply

A

PES<1

37
Q

Draw a perfectly inelastic supply of a good diagram

A
38
Q

Draw a perfectly inelastic supply diagram

A
39
Q

Define joint demand

A

when goods are bought together EG Xbox and controller

40
Q

Define composite demand

A

When the good demanded has more than one use, EG milk

41
Q

Define derived demand

A

When the demand for one good is linked to a related good EG brick demand is derived for the demand for houses

42
Q

Define joint supply

A

When supply of one good causes the incr/decr of supply for another good EG wool and lamb

43
Q
A

Econ AQA Paper One (6 decks)

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