RANDOM ECON KNOWLEDGE

Question 1

3 Relationships between products

Answer 1

substitute goods / complementary goods / unrelated goods

Question 2

Speculation Significance

Answer 2

when there is speculation of a product’s price changing in the future, it will often lead to a change in that product’s immediate demand

Question 3

Non-Price Determinants of Demand

Answer 3

• income
• price of substitute / complementary goods
• consumer preference
• age / government policy / season

Question 4

Price Elasticity of Demand (PED)

Answer 4

percentage change in quantity demanded / percentage change in price

Question 5

Income Elasticity of Demand (YED)

Answer 5

percentage change in quantity demanded / percentage change in income of the consumer

Question 6

Supply

Answer 6

the quantity of a good or service that producers are willing and able to supply at different prices in a given period of time

Question 7

Demand

Answer 7

the quantity of a good or service that consumers are willing and able to purchase at different prices in a given period of time

Question 8

Short-Run

Answer 8

the period of time it takes to fix one factor of production

Question 9

Long-Run

Answer 9

the period of time it takes in which all factors of production are variable

Question 10

Price Elasticity of Supply (PES)

Answer 10

percentage change in quantity supplied / percentage change in price of the product

Question 11

3 Significances of Price

Answer 11

• signal : prices give information to the market
• ration : prices create scarcity
• incentivize : prices dictate whether or not consumers will purchase

Question 12

Merit Good

Answer 12

a commodity or service that is regarded by society to be deserving of government finance

Question 13

Demerit Good

Answer 13

a good or service that when consumed is considered to be unhealthy

Question 14

Indirect Tax

Answer 14

a tax imposed upon the expenditure of a certain good or service

Question 15

Subsidy

Answer 15

a sum of money granted to producers by the government to keep the price of commodities and services low

Question 16

Reasons to implement an indirect tax

Answer 16

• to discourage the consumption of a demerit good
• to provide a source of revenue for the government
• combat inflation
• to redistribute income (luxury goods tax)

Question 17

Reasons to implement a subsidy

Answer 17

• to keep the price of an essential good low
• to guarantee a supply for a good deemed necessary by the government
• to allow producers to compete with cheaper overseas competitors

Question 18

Price Ceilings

Answer 18

when a government sets the maximum price of a good or service below the market equilibrium price

Question 19

Price Floor

Answer 19

when a government sets the minimum price of a good or service above the equilibrium price

Question 20

Market Failure

Answer 20

when there is an inefficient distribution of goods and services in the free market

Question 21

Factors of Production

Answer 21

• land
• labor
• entrepreneurship
• capital