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Define Derived Demand
When demand for one product is driven by the demand for another product.
List the factors that will determine PED for a product.
-Availability of substitutes -The necessity of the item -Price in relation to income -Time -Breadth of product definition
Define allocative efficiency in terms of consumer and producer surplus
Allocative efficiency occurs where consumer and producer surplus (community surplus) is maximised.
On a linear demand curve, revenue is maximised where PED = _____ .
-1
Say consumer income increases. What will happen the demand for an Inferior good?
Demand curve shifts left
Fill in the blank: PED is Inelastic Price Decreases Revenue _______
decreases
If the price of a product increases, what will happen to the demand curve for the product?
No change in Demand curve. Quantity Demanded decreases (contraction/ movement along Demand Curve)
Define Supply
Supply is the quantity of a good or service that producers are willing and able to supply onto the market at any given price in a given time period.
State what is meant by Diminishing Marginal Utility
As we consume more of a product, the utility we get from consuming the next product deceases.
Define Normal Goods.
Goods where Quantity Demanded increases as income increases
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