term 1

Question 1

how does an outward shift in the PPC occur

Answer 1

the invention of new technology, the discovery of natural resources, and the increased labour force

Question 2

calculation of PED

Answer 2

% change in QD / % change in price

Question 3

inward shift in the PPC

Answer 3

depletion of natural resources, low investment in new technologies, natural disasters

Question 4

mixed economy

Answer 4

an economy composed of the private and public sector

Question 5

economy

Answer 5

an area where people and firms produce, trade, and consume goods and services

Question 6

% change calculation

Answer 6

new - old/ old (x100)

Question 7

factors that cause shifts in the supply curve

Answer 7

• the cost of production
• resources available
• technological changes
• subsidies

Question 7

micro and macroeconomics

Answer 7

micro - study of individual markets
macro - study of entire economy

Question 8

market

Answer 8

any set of arrangements that brings together all producers and consumers to engage in the exchange of goods and services

Question 9

resource allocation

Answer 9

the way in which economies decide what goods and services to provide to solve the three economic questions

Question 10

unitary price elastic demand

Answer 10

when the % change in price is directly proportional to the percentage change in demand. PED = 1

Question 11

price inelastic demand

Answer 11

when the % change in price brings a less than proportionate % change in quantity demanded. PED < 1

Question 12

revenue (definition and calculation)

Answer 12

amount of money a firm/producer generates from sales. quantity sold x price

Question 13

planned economy

Answer 13

an economic system where the government makes crucial decisions. land and enterprise are state-owned and resources are allocated by directives (state instructions given to state-owned enterprises)

Question 14

market economy

Answer 14

an economic system where consumers determine what is produced. resources are allocated by the price mechanism and land and capital are privately owned.

Question 15

the price mechanism

Answer 15

the way decisions made by households and firms interact to decide the allocation if resources

Question 16

resources

Answer 16

inputs required for the production of goods and services

Question 17

perfectly elastic demand

Answer 17

when the quantity demand changes without any change in price. PED = infinity

Question 18

perfectly inelastic demand

Answer 18

when the price changes have no effect on demand whatsoever. PED = 0

Question 19

factors that cause shifts in the demand curve

Answer 19

• income
• taxes on income
• the price of substitutes
• the price of complements
• population

Question 20

significance of PES

Answer 20

consumers - benefit from being elastic
producers - elasticity means higher profit
government - elasticity helps to increase output

Question 21

determinants of PES

Answer 21

• competition
• existence of spare capacity
• ease of accumulating stocks
• time
• availability of resources

Question 22

inelastic supply

Answer 22

when a change in price brings a less than proportionate change in quantity supplied. PES < 1

Question 23

elastic supply

Answer 23

when a change in price causes a less than proportionate change in quantity supplied. 1 < PES < infinity

Question 24

perfectly inelastic supply

Answer 24

when a change in quantity supplied does not occur during a change in price. PES = 0

Question 25

perfectly elastic supply

Answer 25

when a change in price causes a complete change in quantity supplied. PES = infinity