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A-Level Economics Year 1 > Supply, Demand, Markets & Elasticity- MM > Flashcards

Supply, Demand, Markets & Elasticity- MM Flashcards

1
Q

What is demand?

A

The amount of a product that consumers are willing and able to buy at a certain price over a given time period

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2
Q

What is price?

A

The amount of money a business receives for selling each individual good or service

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3
Q

What is quantity demanded?

A

Total amount of a good or service that consumers demand over a period of time (price, quantity and time period needed)

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4
Q

What is individual demand?

A

The quantity of a good or service demanded by one individual at different prices, given income and other prices

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5
Q

What is market demand?

A

The total quantity of a good demanded by all individuals at each price

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6
Q

What is the income effect?

A

Lower prices increase purchasing power

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7
Q

What is the substitution effect?

A

Consumers substitute expensive goods for the cheaper goods

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8
Q

What is cost?

A

The amount of money a business pays when it buys something

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9
Q

What is the law of demand?

A

Assuming Ceterus paribus, the higher the price, the lower the demand

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10
Q

What are 5 possible determinants of demand?

A

1) A change in income (RDI)
2) A change in the price of other goods (substitutes and complements)
3) A change in tastes and fashion
4)Advertisements
5) Season and Weather

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11
Q

When a demand graph shifts 1) left and 2) right what is happening to the demand?

A

1) Decrease
2) Increase

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12
Q

Three types of demand?

A

1) Derived demand (a good or FOP is demanded for something else)
2) Composite demand (good which is demanded for multiple uses)
3) Joint demand (goods bought together)

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13
Q

What are 5 factors affecting tastes and fashions?

A

1) Quality
2) Advertisements
3) Weather
4) Expectations of future price rises
5) Change in circumstances

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14
Q

What is the rule of supply?

A

As price increases, so does supply (profit wanted)

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15
Q

What are 5 determinants of supply?

A

1) A change in cost of making the product
2) A change in availability of resources
3) A change in tax or subsidies
4) A change in technology
5) A change in price of products in competitive or joint supply

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16
Q

What is equilibrium?

A

Where demand=supply

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17
Q

What is consumer surplus?

A

Extra amount a consumer is willing to pay, but doesn’t
Increases as price decreases

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18
Q

Where are consumer and producer surplus on a S&D graph?

A

Producer surplus= Below p(n), to S1 origin, to equilibrium
Consumer surplus= Above p(n), to D1 origin, to equilibrium

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19
Q

What is producer surplus?

A

What producers are willing and able to supply a good for and the price they actually receive
Higher the price, greater the producer surplus

20
Q

What is elasticity?

A

Measures the responsiveness of quantity demanded/supplied to a change in price or other key variables (income, price of substitutes/compliments)

21
Q

What are the 4 types of elasticity?

A

1) Price elasticity of Demand (PeD)
2) Price elasticity of Supply (PeS)
3) Cross elasticity of Demand (XeD)
4) Income elasticity of Demand (YeD)

22
Q

What are the formulas for elasticity?

A

% change in QD/QS ÷ % change in key variable (price, RDI etc)

23
Q

What determines whether it is elastic or inelastic?

A

If the number (no sign) is bigger than 1

24
Q

What is the normal result for PeD?

A

Negative number

25
Q

What is the expected result for YeD, and what is it if it is negative?

A

Positive number, if negative it’s an inferior good

26
Q

What is an inferior good?

A

A good that increases in demand when RDI falls

27
Q

What is the expected answer for PeS?

A

Positive number

28
Q

For XeD, why is the sign important?

A

Determines whether it’s a compliment or substitute good

29
Q

For XeD, if the answer is 1) Positive and 2) Negative, what type of good are they?

A

1) Substitute
2) Compliment

30
Q

What does an elastic demand curve look like?

A

Flat D curve

31
Q

What does an inelastic demand curve look like?

A

Steep D curve

32
Q

What does an elastic supply curve look like?

A

Flat S curve

33
Q

What does an inelastic supply curve look like?

A

Steep S curve

34
Q

What does a 1) positive and 2) negative Elastic YeD change look like?

A

1) Big shift right
2) Big shift left

35
Q

What does a 1) positive and 2) negative Inelastic YeD change look like?

A

1) Small shift right
2) Small shift left

36
Q

Where is total revenue on a D curve?

A

P1 x Q1

37
Q

If demand is price elastic, how do TR and price interact?

A

Increased price reduces TR & Reduced prices increases TR
(Opposite directions)

38
Q

if demand is price inelastic, how do TR and price interact?

A

Increased price increases TR & Reduced prices reduces TR
(Same direction)

39
Q

What is PeD?

A

The responsiveness of quantity demanded to a change in price of that product

40
Q

What is YeD?

A

The responsiveness of quantity demanded for a product due to a change in the level of RDI in the economy

41
Q

What is PeS?

A

The responsiveness of quantity supplied to a change in price of that product

42
Q

What is XeD?

A

The responsiveness of quantity demanded due to a change in the price of another product

43
Q

What are 5 influences on PeD?

A

1) Substitutability (more substitutes= elastic)
2) Luxury (elastic) or necessity (inelastic)
3) Addictive products (inelastic)
4) Branded goods (inelastic)
5) Time (over time services become elastic)

44
Q

What are 4 influences on PeS?

A

1) Time (long term= elastic)
2) Mobility of FOP
3) Availability in storage facilities (more= elastic)
4) Nature of the goods (natural= inelastic in short term)

45
Q

What are 2 influences on YeD?

A

1) The nature of the good
-Luxury goods (elastic)
-Necessities (inelastic)
2) Basic items/ services

46
Q

What does XeD depend on?

A

The relationship between the goods

A-Level Economics Year 1 (10 decks)

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