1. PED = %Change in QD / %Change in Price
2. The price elasticity of demand is the responsiveness (how they change their demand) of consumers to a change in the price of a good.
3. The good is inelastic
4. Perfectly Elastic = -Infinite; Perfectly Inelastic = 0; Unit Elastic = 1; A value between 0 and -1 is inelastic; A value between -1 and -Infinite is elastic.
5. If there is derived demand for a good then it means that the good is demanded for what it produces. For example labour isn’t demanded for labour but for what it produces. Similarly copper isn’t demanded for the copper itself (usually!) but for what it produces like cars.
8. In the middle of the curve demand is unit elastic; above this (i.e to the left) demand is elastic (the part which touches the y axis) and below unit elastic is inelastic demand (to the right; the part which touches the x axis).
9. Because at a high price, the quantity demanded is low but at a lower price the quantity demanded is higher.
10. Because at a high price, the quantity supplied is high but at a lower price the quantity supplied is lower
11. For certain products the CCE means that the demand for the good is higher at a higher price. This is because the good is seen to have a strong brand. Also the fact that it is expensive in the first place may appeal to people wanting to show off their wealth.
12. Non Price Change: successful advertising campaign, positive health benefits, celebrity endorsement, the product comes into fashion.
13. Non Price Change: negative health effects, release of more substitutes, incomes fall, credit becomes hard to obtain.
14. A price change
15. A statement which contains a fact which can be refuted or proved
16. A statement (usually containing the words should, or ought) which is a value judgement
17. The country is operating inefficiently, and hence isn’t using its available resources to the maximimum potential.
18. The country is operating efficiently
19. No it is not; a point outside the curve is unattainable
20. Land, Labour and Capital
21. An improvement in technology, an increase in the population, a better educated workforce (basically any improvement in the quantity or quality of the factors of production)
22. A deterioration or loss in the quality or quantity of a factor of production: a natural disaster which destroys capital, a disease which reduces the population, a computer virus which destroys computers
23. There is very little unemployment (but there is still frictional unemployment)
- Production per good is lower
- Workers can increase their expertise in their specific field
- Leads to an increase in output
- Workers may receive higher pay for their specialised job
- Some people aren’t good at certain tasks; they wouldn’t specialise in these and hence production would be better
- If workers are specialised then there quality may improve as they are very good at that specific task
- Improved productivity due to specialisation
- There is a large cost to train these workers so they become specialised
- If a specialised worker is ill or leaves work then the production process may have to be halted until a replacement can be found and or trained. This is expensive as output isn’t being produced and there is the cost of training/hiring a new worker.
- Quality of the good may fall if the worker gets demotivated from the same task
- Workers may become bored doing the same mundane task; they may prefer variety which specialisation doesn’t offer them.
- It may be easier to replace a specialised worker with a machine as their task is quite specific (although this can’t happen to all tasks).
25. An absolute advantage means a country is better at producing everything, compared to another country.
26. Comparative advantage is where one entity should produce a certain good because it is better at producing this. It can then trade with other entities who have comparative advantages over other goods. This should apply even if one entity has an absolute advantage over all other entities.
27. QD will increase
28. QD will increase
29. A normal good is a good for which when incomes rise, quantity demanded also rises, and vice versa.
30. An inferior good is a good for which when incomes rise, quantity demanded falls, and vice versa.
31. A good which is extremely inferior, where the quantity demanded rises for it even if the price increases dramatically (and incomes are low).
32. An Xbox and the Xbox Kinect
33. An Xbox and a PS3 (generally, although some people may have both!)
34. A complementary good is a good where if the price rises, the quantity demanded for the complementary good falls. The goods are likely to be bought in tandem. For example if the price of Xbox’s rises then the demand for Kinect’s is likely to fall.
35. A substitute good, is a good that has many substitutes and hence is usually inelastic in demand. A rise in the price of one product will result in the quantity demanded for its substitute good to increase, as consumers switch their purchase. Such an example may be brands of apple. If one brand increases its price, people are likely to purchase instead a substitute apple which is cheaper.
36. YED = %Change in QD / %Change in Income
37. XED = %Change in QD of Good A / %Change in Price of Good B
38. (Change/Original) * 100
39. The good is inferior
40. The good is normal
41. The goods are substitutes
42. The goods are complementary
43. Costs of Supplies (Raw material), Technology, Indirect taxes and subsidies, Labour Productivity, Price Expectations.
44. Consumer Surplus = Willingness to Pay – Market Price
45. The triangle above market price within the demand curve.
46. Producer Surplus = Market Price – Willingness to Supply
47. The triangle below the market price within the supply curve.
48. PES = %Change in QS / %Change in Price
49. Inelastic in Supply
50. Elastic in Supply
51. All other things being equal
52. Tax funds can be used to compensate victims or can be used in other government schemes, also taxes reduce the amount produced to the social optimum point where less of the good/service are produced therefore being more beneficial to society.
Disadvantages of taxes are that firms may relocate to other countries with less stringent taxes, if the demand for a good or service is price inelastic then the reduction in good/services wont be great, indirect taxes make firms less internationally competitive, it might lead to the development of illegal markets and also it is hard to determine what price to tax the good or service at.
53. It would cause a leftward shift
54. It would cause a rightward shift
55. The advantage is that they increase the consumption which is generally considered beneficial (as goods that receive subsidies are usually merit goods which are under-consumed).
The disadvantage is that there is an opportunity cost to the government, it may lead to higher taxation or reduced government spending in other sectors. Also firms may become inefficient in production if they rely upon subsidies, and the firm may absorb the tax in the form of profits rather than pass them on to consumers in the form of a price reduction.
56. Speculation is the buying of a commodity or asset due to the unfounded normative belief that the price of the asset/commodity will rise (or with more complex instruments will fall but will result in a profit for the speculator) and hence make the speculator money.
57. Copper, tin, bauxite, gold oil
58. The prices fluctuate and are volatile/unstable.
59. It accentuates the volatility of the price.
60. A minimum price scheme could be established by a government agency, this is achieved by the government purchasing any supply below a certain price (the minimum stated price).
62. Wage rate, productivity (the output that unemployment can create)
63. Workers; people that wish to be employed