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commerce > topic 2 > Flashcards

topic 2 Flashcards

1
Q

what factors can cause a change in demand?

A

-income (as income increases the demand for inferior goods decreases)

-tastes and preferences

-population

-substitutes + complements

-price of other goods

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2
Q

what are normal goods?

A

A good whose demand shows a direct relationship with a consumers income

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3
Q

What are inferior goods?

A

A good whose demand drops when peoples incomes rise

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4
Q

What is demand?

A

A consumers desire and willingness to buy a product

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5
Q

What is supply?

A

The quantity of a commodity that a producer is willing and able to sell at a certain price over a given period of time.

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6
Q

What are the determinants of supply?

A

-cost of production
-price of related goods
-state of technology

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7
Q

What does a change in quantity do?

A

Causes a movement up or down the supply or demand curve

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8
Q

What does a increase or decrease do to shift. and demand?

A

Causes a shift in the demand or supply curve

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9
Q

What is market equilibrium?

A

Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable.

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10
Q

What happens when price is below market equilibrium?

A

It causes a shortage

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11
Q

What happens when price is above market equilibrium?

A

It cause a surplus

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12
Q

What is the governments main objectives?

A

-full employment
-price stability
-economic growth (sustainability)
-redistribution of income

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13
Q

What is monetary policy?

A

-carried out by the RBNZ (reserved bank of new Zealand) to control inflation by changing interest rate / money supply to influence economic activity.

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14
Q

What is the aim of monetary policy?

A

-control inflation
-keep interest rate between 1-3%

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15
Q

What is fiscal policy?

A

Fiscal policy involves the use of government spending and tax revenue

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16
Q

What is the aim of fiscal policy?

A

To affect the levels of economic growth and jobs

17
Q

What is supply side policy?

A

Policies that aim to increases productivity

18
Q

What is the aim of supply side policy?

A

-To promote jobs, lower inflation and increase economic growth

-increases productivity and competition and innovation all of which decrease inflation

19
Q

What is the difference between private and public goods?

A

Private Goods are products that are excludable and rival. Public goods describe products that are non-excludable and non-rival.

20
Q

What are merit and demerit goods?

A

merit goods are under-consumed due to positive externalities, while demerit goods are over-consumed due to negative externalities.

21
Q

What is the purpose of tax?

A

to raise revenue for government expenditures

22
Q

What are the features of good tax?

A

Perceived as fair
Cheap to collect
Must not discourage people from working

23
Q

What is progressive tax?

A

Progressive tax—A tax that takes a larger percentage of income from high-income groups than from low-income groups.

24
Q

What is proportional tax?

A

proportional tax—A tax that takes the same percentage of income from all income groups.

25
Q

What is regressive tax?

A

regressive tax—A tax that takes a larger percentage of income from low-income groups than from high-income groups.

26
Q

What is direct tax?

A

A direct tax is one that the taxpayer pays directly to the government. These taxes cannot be shifted to any other person or group

27
Q

What is indirect tax?

A

An indirect tax is one that can be passed on-or shifted-to another person or group by the person or business that owes it.

28
Q

What is PED?

A

PED measures the responsiveness of quantity demanded to a change in the price of good.

29
Q

Formula for PED?

A

%change in Q / %change in price

30
Q

What is elastic?

A

Elastic (responsive to changes)

31
Q

What is inelastic?

A

unresponsive to changes

32
Q

When is demand elastic?

A

-many substitutes so the consumer can switch alternatives easily

33
Q

When is demand inelastic?

A

-few substitutes like petrol and eggs
-the good is a necessity like salt
-It is not durable and must be replaced after one use such as ice cream

34
Q

what happens to total revenue when the price of a product with elastic demand is increased?

A

If demand is elastic, then a price increase reduces the total revenue.

35
Q

what happens to total revenue when the price of a product with elastic demand is decreased?

A

f demand is price elastic, then decreasing price will increase revenue.

36
Q

Why is PED important fir decision making?

A

it determines the effect of its price changes on total revenue.

When a business is considering increasing or decreasing price it is important to know what will be the resulting impact on its sales revenue.

37
Q

demand curve for inelastic demand?

A

relatively steep, a change in price has produced a. much smaller QD.

38
Q

demand curve for elastic demand?

A

relatively flat, a change in price has produced a much larger change in QD.

commerce (3 decks)

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