Theme 1 AO2 Flashcards
1
Q
Cigarettes increase in price. How does demand respond?
A
Demand is likely to stay unchanged as cigarettes are an inelastic good.
2
Q
The price of Coke increases. How does this affect demand for Pepsi?
A
Demand for Pepsi is likely to increase as less consumers will purchase Coke.
3
Q
A Gucci jacket has increased in price. How does this affect the demand for the Gucci jacket?
A
The demand for the Gucci jacket is likely to decrease as luxury goods are usually price elastic.
4
Q
Give three examples of a public good.
A
A street lamp, a park and national defense
5
Q
Give an example of specialisation.
A
A firm decides to produce phone screens rather than the whole phones.
6
Q
Give two examples of government intervention.
A
Giving subsidies to farmers and setting a maximum price on rent
