unit 2

Question 1

why are auctions good for the supplier

Answer 1

because they get the maximum possible price that someone is willing to pay

Question 2

name some problems with trade

Answer 2

opinions of value when trading
could get better deal else where
dodgy deal
opportunity cost if traded wrong

Question 3

usually what kind of graph is a demand curve graph

Answer 3

it shows an inverse relationship (negative correlation)

Question 4

what is a limitation with a demand curve graph

Answer 4

based on an assumption

no representative number of consumer and average

Question 5

what happens if the price of cheap goods increase?

Answer 5

2 options;
demand increases as less money for expensive goods
…
or can decrease if gap between more expensive goods and cheaper is very small as it would be more worth while getting the better thing.

Question 6

how do you move along the demand curve

Answer 6

changing the price
higher price = contraction of demand
lower price = extension of demand

Question 7

how do you move the demand curve move?

Answer 7

an increase or decrease in demand

Question 8

in what circumstances would a PPF line be straight

Answer 8

if the axis are directly proportional to each other
with the same opportunity cost
trade off is constant

Question 9

what is a change in quantity caused by?

what does this mean for the demand curve?

Answer 9

cause: change in price
result: extension or contraction ON demand curve

Question 10

what is a change in demand caused by?

what does this men for the demand curve?

Answer 10

cause: non-price variable e.g. income or supply
result: moves the demand curve

Question 11

what is the ‘price elasticity demand’ always? or PED

Answer 11

negative

Question 12

how do you work out the percentage point?

Answer 12

large percentage take away the smaller percentage

Question 13

how do you work out the change in percentage?

Answer 13

work out what percentage of the new percentage is of the original one.

Question 14

what effects the demand curve? (4)

Answer 14

1) changes in real disposable income
2) taste and preference
3) price and availability
4) change in population

Question 15

how do you calculate PED XED and YED

Answer 15

% change of quantity demanded
———————————————– x100
% change in price, income or X

Question 16

can you get a positive PED

Answer 16

yes, but it is very unusual

examine what variable has caused this

Question 17

when does PED perfectly elastic occur

Answer 17

when there is a perfect substitute so price cannot change for competition reasons

Question 18

usual determinants of PED

Answer 18

substitutes 
essential and luxury goods
cost of change 
consumption
time
peak times

Question 19

how substitutes effect PED

Answer 19

more substitutes = more elastic as customer find it easy to alter their buying happen due to large options

Question 20

how essential goods and luxury goods effect PED

Answer 20

essential = inelastic as they are bought regardless of the price
luxury = elastic as they aren't needed

Question 21

how cost of change effects PED

Answer 21

if you are in a phone contract, and you want to get out of it, yo have to pay extra. this makes the demand inelastic and may make people want to go to pay as you go

Question 22

how consumption effects PED

Answer 22

addictions = inelastic and consumers are less price sensitive

Question 23

how time effect PED

Answer 23

short run can be inelastic as customer get used to the price change then long run become elastic when they are used to the prices

Question 24

how peak effect PED

Answer 24

demand increases in peak times and is inelastic. in non peak times there is more competition of who can make sales ( desperate and low price) elastic

Question 25

in YED how are inferior and normal goods distinguished

Answer 25

inferior = negative 
normal = positive

Question 26

in XED explain how and why the demand curve could react to price

Answer 26

increase in the price of a substitute good = demand curve moves out because people want the cheaper item

increase in price of a complimentary good = demand curve comes inward because less of a demand for the good on its own

Question 27

high XED

Answer 27

good substitute
very elastic
cannot change price

Question 28

what is XED and how is it calculated

Answer 28

measures responsiveness of the demand of a good when the price of another good changes
%change A / % change B

Question 29

XED graphs for complimentary,substitute and independent goods

Answer 29

complimentary = downwards demand
substitute = positive demand 
independent = horizontal demand

Question 30

XED figure for complimentary,substitute and independent goods

Answer 30

complimentary= negative
substitute= positive
independent= zero