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ECON 102 BIG QUESTIANO BANK OF KNOWLEDGE > WEEK 2 > Flashcards

WEEK 2 Flashcards

1
Q

What is comparative statics

A

Comparison of 2 economic outcomes before and after a shock

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2
Q

What does comparative mean in comparative statics

A

Compares the 2 equilibrium’s before and after

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3
Q

What does static mean in comparative statics

A

Doesn’t study the motion towards equilibrium or the change itself

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4
Q

What is changes in demand

A

A change in quantity demand is a movement along a curve

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5
Q

What does a change in demand refer to

A

Refers to a new curve

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6
Q

Is the changes in demand the same as changes in supply

A

Yes

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7
Q

What are the factors that shift demand

A

Substitute goods
Complementary goods
Changes in income
Change in preferences
Change in population
Change in expectation of future prices

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8
Q

How does substitute goods shift demand

A

If price of a sub increases demand increases

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9
Q

How does complementary goods shift demand

A

If price of complementary decreases demand increases

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10
Q

How does change in income shift demand

A

For a normal good an increase in demand
For an inferior good leads to decrease in demand

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11
Q

How does change in preference shift demand

A

When something is found to be bad (fags) decrease in demand

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12
Q

How does population shift demand

A

More people more demand

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13
Q

When predicting the market an increase in demand

A

Increased price and quantity

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14
Q

When predicting the market an decrease in demand

A

Decreases in equilibrium price and quantity

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15
Q

What are the factors that shift supply

A

Any changes that affect the cost of production

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16
Q

Example of factors shifting supply

A

An increase in labour prices - Decreased supply

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17
Q

When predicting the market an increase in supply

A

Will lead to a decrease in equilibrium prices and increase in quantity

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18
Q

When predicting the market a decrease in supply

A

lead to an increase in equilibrium price and decrease in quantity

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19
Q

What is price elasticity

A

A measure of how much quantity demanded is effected by changes in prices

20
Q

Whats the formula for elasticity

A

%change in quantity demanded / %change in price - Always positive

21
Q

How to find %change in price

A

new price - old price / 100

22
Q

How to find %change in demand

A

new demand - new price / 100

23
Q

If E > 1

A

Demand is elastic - customers responsive over price changes

24
Q

If E < 1

A

Demand is inelastic - Consumers unresponsive over price changes

25
Q

If E = 1

A

Demand is unit elastic - quantity changes the same as prices

26
Q

When is demand perfectly elastic and inelastic

A

elasticity = infinity
inelastic = 0

27
Q

What does perfectly elastic mean

A

Even slightest increase in price leads to switches to subs

28
Q

What does perfectly inelastic mean

A

Consumers have no substitutes

29
Q

In graphs how is perfectly inelastic and elastic shown

A

elastic is a straight line across inelastic is straight line up

30
Q

What is the largest determinant of E

A

Availability of subs

31
Q

what is arc elasticity

A

The price elasticity between 2 points on the demand curve

32
Q

What is price point elasticity

A

The price elasticity at a certain point

33
Q

What is the price point elasticity formula at one point

A

1/gradient (always positive) x p/q

34
Q

if p=20-4q and a=3,8 whats the elasticity

A

1/4 x 8/3 = 2/3

35
Q

What does the price point elasticity number mean - with E=2/3

A

If there is an increase of 1% in price it would lead to a 2/3% decrease in demand

36
Q

When price and quantity is the same the curve with what will have the higher demand

A

Smaller gradient

37
Q

When gradient is the same

A

Elasticity increases as we move along a demand curve as p/q declines

38
Q

How to find total revenue

A

P x Q

39
Q

If demand is elastic and a small price increases then

A

It will lead to a big drop in quantity - TR decrease

40
Q

If demand is inelastic a large price increase will

A

Decrease demand a little - TR increase

41
Q

Determinants of E

A

Availability of subs
time to adjust
Share of budget
Addiction

42
Q

Why is time to adjust a determinant of E

A

short term consumers find it hard to change behaviour - long term doesnt

43
Q

Why is share of budget a determinant of E

A

What % of your budget is spent on a good

44
Q

Why is adiction a determinant of E

A

addictive goods tend to be inelastic

45
Q
A

ECON 102 BIG QUESTIANO BANK OF KNOWLEDGE (9 decks)

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