Micro Economics

18 important questions on Micro Economics

What are goods in joint supply?

  • Two goods where production of one increases production of the other.

What is a price taker?

  • A person or firm with no power to influence the market price.

What is Price Elasticity of Demand (PED) ?

The responsiveness of Quantity demanded, to a change in price
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What is the Formula for PED?

The % change in quantity demanded, divided by the % change in price
-Q before you P
%change.in.QD / %change.in.Price

What is Elastic demand ?

Where Quantity Demanded changes by a larger % than price, Elastic demand will have a value Above 1 (or below -1)

What is Inelastic Demand?

Where Quantity Demanded changer by a smaller % than price, will have a value Below 1 (or above -1)

What is Unit Elasticity of demand?

Where Quantity demanded changes by the same % as price, will be exactly 1 or -1

What are substitute goods?

  • A pair of goods seen as alternatives.
  • Price of one increases, demand for other rises.

What is the law of demand?

  • Quantity of a good demanded per period of time will fall, as price rises
  • Quantity of a good demanded per period of time will rise, as price falls.
  • Other things being equal (ceteris paribus).

What are substitutes in supply?

  • Two goods where increased production of one Diverts resources from producing the other

Describe equilibrium price.

  • A price where quantity demanded equals quantity supplied
  • The price where there is no shortage or surplus

What is the formula for Price Elasticity of Supply (PES)?

Still Q before you P

What is Price elasticity of Supply?

The responsiveness of Quantity supplied to a change in price

What is Income elasticity of demand? (YED)

The responsiveness of demand to a change in consumer incomes

What is the formula for Income elasticity of demand? (YED)

It’s this

What is normal goods + inferior goods YED?

  1. Normal goods = Positive YED
  2. Inferior goods = Negative YED

What is Cross Price Elasticity of Demand?

The responsiveness of Demand for one  good to a change in the price of another

What is the formula for CPED?

% change in quantity demanded of Good a / % change in price of good b

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