Topic 2 - Price determination in a competitive market Flashcards
1
Q
Define; ‘Demand’
A
The Q of a good or service the market is willing to buy at given P
2
Q
Explain the ‘law of demand’
A
As P of a good or service falls the QD increases
The opposite is also true
3
Q
List thee factors that might lead to a shift f the demand curve.
A
Changes in real disposable income Changes in taste or preference Population P of Substitutes P of Alternatives
4
Q
Define; ‘Price elasticity of demand’
A
The responsiveness of QD in terms of P change
5
Q
What is the formula for PED
A
PED = %Change QD / %Change P
6
Q
What is the formula for YED
A
YED = %Change QD / %Change in real incomes
7
Q
What is the formula for XED
A
XED = %Change QD good A / %Change P good B
