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AICE Econ AS Unit 2
Review of terms and concepts from Unit 2 of AICE Econ AS Level
Term | Definition |
---|---|
Market | A place where buyers and sellers come together. |
Price Mechanism | The way that market forces decide who gets what in an economy. |
Demand | A measuremnt of consumers ability and willingness to purchase a good or service at a given price. |
Supply | A measurement of producers willingness to produce a good or service at a given price. |
Ceteris Paribus | Latin for "All other things being equal". |
The components that change demand are... | Changes in consumer taste, prices of related goods, income, the polulation and consumer expectations about the future. (TRIPE) |
The components that change supply are... | any factor that affects how profitable a good or service is to produce. |
A change in demand is shown as a... | Movement of the demand curve. |
A change in supply is shown as a... | Movement of the supply curve. |
A change in quantity demanded is shown as... | A movement along the demand curve. |
A change in quantity supplied is shown as... | A movement along the supply curve. |
A good with a posative relationship between income and consumption. | A normal good |
A good that is demanded more as incomes fall. | An inferior good. |
Complimentary Good | A good whos demand is tied positively to another good. (Example: Skis and ski boots) |
Substitute Good | A good whos demand relates negatively to anther good. (Example: Skis and Snowboards) |
Composite Demand | When products are used for more than one purpose and the use for one purpose decreases its availability for another purpose. |
Elastic Good | A good where a small change in price will lead to a relatively large change in quantity demanded. |
Inelastic Good | A good where a large change in price will lead to a relatively small change in quantity demanded. |
Price Elasticity of Demand (PED) | % change in quantity demanded / % change in price |
Unitary Elasticity | PED = 1. When price increases quantity demanded decreases by the exact same amount. It also works in reverse. |
Income Elasticity of Demand (YED) | % change in quantity demanded/ % change in income. |
Cross Elasticity of Demand (XED) | % change in quantity demanded of product A/ % change in the price of product B |
Elasicity of Demand > 1 | Is Elastic |
Elasticty of Demand < 1 | Is Inelastic |
Cross Elasticity of Demand (XED) that is negative indicates that the goods are... | Compliments |
Cross Elasticity of Demand (XED) that is positive indicates that the goods are... | Substitutes |
Cross Elasticity of Demand (XED) or zero indicates that the goods are... | Unrelated |
Consumer Surplus | When some consumers are willing to pay greater than the current market price for a good or service. |
Price Elasticity of Supply | % change in quantity supplied/ % change in price |
Total Revenue | The total amount of money a producer brings in. It is counted before expenses are deducted. |