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21 Cards in this Set
- Front
- Back
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Factors affecting PED |
Number of close substitutes Brand loyalty Degree of necessity/Luxury Switching costs |
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PED Formula |
%change of Q Demanded/ %change of Price |
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PES Formula |
%change in Q Supplied/ %change in Price |
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PES Definition |
How responsive the supply of a product is to a change in price/cost. A firm will want to know this to know easily they can change supply. |
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Factors affecting PES |
Spare production capacity Production speed |
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YED Definition and Formula |
The change in Q demanded due to a change in (Real) Income. %change in Q Demanded/ %change in Income |
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Factors affecting YED |
What type of good it is: Inferior, Normal, Necessities, Luxury Inferior (YED<0) Normal (YED>0) Necessities (YED between 0-1) Luxury (YED>1.5) |
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XED Definition and Formula |
How Demand of Product X is affected by the price change of Product Y |
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Coefficients of XED |
Substitutes= Competitive demand, XED is always POSITIVE Complements= Joint demand, XED is always NEGATIVE Unrelated= 0 XED, do not affect each other |
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Demand definition |
The quantity of a good/service that consumers are willing/able to buy at a given price and time. |
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How does demand work in relation to price? |
Demand works inversely to price- as price increases, demand decreases |
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What is Joint Demand? |
Demand for goods that are interdependent, e.g. Xbox and Xbox controller. |
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What is Competitive Demand? |
Demand for goods that are rivals/in competition with each other, e.g. Xbox and Playstation |
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What is Composite Demand? |
Demand for a good that has multiple uses, e.g. demand for plastic can vary because it has so many uses |
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What is Derived Demand? |
Demand for a factor of production which derives not from the good itself, but the good which it produces, e.g. a 3D Printer |
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What sorts of Factors could cause shifts in Demand? |
Income, Advertising, Attitudes/Information, Price of Substitutes, Price of Compliments, |
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Supply Definition |
The Quantity of a good/service that a producer is willing and able to supply to the market at a given price. |
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Why is Supply drawn as sloping upwards from left to right? |
If market prices rise, it becomes more profitable for a firm to increase their output (Profit Motive). |
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Causes of Shifts in Market Supply Curve |
Changes in the unit costs of production (e.g. higher wages), Advances in technology, Taxes+Subsidies |
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What is Consumer Surplus? |
The difference between the price the consumer is willing to pay and the price they actually pay. |
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What is Producer Surplus? |
The difference between the price a producer is willing/able to supply a good for, and the price they actually receive. |
