tps

Question 1

explain price mec

Answer 1

1. shift in curve
2. formation of surplus or shortage
3. upwards or downwards pressure on price
4. price increase or decrease
5. consumers more/less willing and able to buy (shift along demand curve)
6. producers more/less willing to produce due to profitability (shift along supply curve)
7. shift till surplus or shortage is eliminated at equilibrium price and quantity

Question 2

definition of demand

Answer 2

amount consumers are willing and able to purchase at a given price over a given period of time

Question 3

law of demand

Answer 3

dealing is inversely related to price ceteris paribus

due to income and substitution effect and LDMU

Question 4

non price determinants for demand

Answer 4

pis get died

price of related goods
income
seasonal changes
govt policies
Expectations of future prices
taste and preferences
derived demand
interest rate
exchange rate
demographic

Question 5

supply definition

Answer 5

quantity of a good or service thst producers are willing and able to offer for sale at a given price over a given period of time

Question 6

law of supply

Answer 6

quantity supplied is directly related to the price of the good ceteris paribus

Question 7

non price determinants for supply

Answer 7

cent fpg

cost of production
Expectations of future prices
natural factors
level of tech
number of firms
price of related goods
govt policies

Question 8

definition of consumer and producer surplus

Answer 8

consumer
difference between the maximum consumers are willing and able to pay and what they actually pay

producers
diff between the amount received and the minimum price they are able and willing to accept

Question 9

functions of price mechanism

Answer 9

1. signalling (shortage surplus)
2. rationing (to those who can afford)
3. incentive (how much to produce/buy)
4. what and how much to produce
5. how to produce
6. for whom to produce

Question 10

explain PED

Answer 10

for change in SS

degree of responsiveness jn quantity demanded one a good to a change in its price

|PED|< 1 price inelastic
|PED|> 1 price elastic
|PED|=1 unitary price elastic
|PED|= 0 perfectly price inelastic
|PED|= infinity perfectly price elastic

Determinants:
PATH (proportion of income, availability of substitutes, time period, habitually of consumption)

Question 11

Explain PES

Answer 11

degree of responsiveness in quantity supplied of a good to a change in its price, ceteris paribus

Determinants
STAMP (spare capacity, time period, availability of stock, mobility of factors of production, production period)

Question 12

CED

Answer 12

degree of responsiveness of quantity demanded of a good to a change in the price of another good cetris paribus

business strategies
1. if sub lowers price also lower price
2. reduce substitutability of goods
3. if price of compliments fall thrm increase production and supply

Question 13

YED

Answer 13

degree of responsiveness of the quantity demanded of a good to a change in consumers income ceteris paribus

business decisions
1. increase production fkf goods in higher demand according to the type of demographic

Question 14

Issues with elasticities

Answer 14

1. computations issues
   - need large amounts of data prone to error
   - quickly outdated
2. cost issues
   - used to predict revenue changes but not change in total cost
3. ceteris paribus assumption
   - unrealistic

Question 15

govt policies

Answer 15

1. taxes
2. subsidies
3. price floor and price ceiling
4. quotas