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28 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What does a demand curve show |
Relationship between price and quantity demand |
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What is a normal good |
A good where if price rises, demand will fall |
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What is rational choice theory |
Makes the assumption that all individual will make logical decisions that will maximise their personal benefit |
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Name 3 determinants of demand |
Price of the good Consumer income Prices of other goods and services |
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What is a Veblen good |
A good where when prices increase, demand increases |
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What is an inferior good |
A good where demand decreases and incomes increase |
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What is a Giffen good |
Certain inferior products where demand rises as consumer incomes increase |
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What is a Substitute product |
One that acts as an alternative, therefore creating competition |
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What is a complementary product |
One that is bought alongside a good or service |
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Define demand |
The amount of a good or service that consumers are willing and able to buy at any given price |
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If the change in demand is caused by price, what happens to the graph |
Moves along the curve |
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If the change in demand is caused by any factor other than price, what happens to the graph |
The curve shifts left or right |
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Give 3 examples of factors that could shift the curve |
Price of substitutes Price of complements Changes in consumer in come Changes in taste |
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What does a ‘+’ sign and a ‘-‘sign mean in elasticity theory |
+ means a positive relationship e.g. if price increases, demand increases - means a negative relationship E.g. if price increases, demand decreases |
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What is PED and what does it measure |
Price Elasticity of Demand measures the responsiveness to a change in price |
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What’s the formula for calculating PED |
% change in quantity demanded Divided by % change in price |
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What does perfectly inelastic mean , what is it’s PED coefficient |
If price was to change the quantity demanded wouldn’t be affected , it’s PED coefficient is 0 |
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How do you calculate XED |
% change in quantity demanded of good x Divided by |
% change in price of good y |
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What determines XED |
Substitutes Complements If a product has no relationship |
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What does perfectly price elastic mean, what would it’s PED coefficient br |
If price was to drop the quantity demanded would be infinite , it has a PED coefficient of infinity |
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If the PED is between 1 and 0 what does that mean the product is |
Price inelastic |
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If the PED coefficient is between 1 and infinity what does that mean the product is |
Price elastic |
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What are 3 things price elasticity of demand is determined by |
Substitutes Time Definition of the market |
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What is income elasticity of demand |
Income elasticity of demand (YED) is a measure of the responsiveness of demand to a change in income |
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Do inferior goods have a negative or positive income elasticity of demand , why |
Negative - if incomes increase, demand decreases |
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How do you calculate YED |
% change in quantity demanded Divided by % change in income |
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What are 2 things income elasticity is determined by |
Whether a good is a necessity or a luxury The level of income of a consumer |
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What is cross-elasticity of demand (XED) |
The measure of the responsiveness of demand for one good x to a change in price of another good y |
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