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    Cards (33)

    • What does PES measure?
      Responsiveness of quantity supplied to price
    • What is the formula for PES?
      PES = %ΔQS / %ΔP
    • What does a PES value of 0 indicate?
      Perfectly inelastic supply
    • What does a PES value of ∞ indicate?
      Perfectly elastic supply
    • What factors influence PES?
      • Mobility of factors of production
      • Rate of cost increase
      • Ability to store goods
      • Spare capacity
      • Time period
    • What does YED measure?
      Responsiveness of quantity demanded to income
    • What is the formula for YED?
      YED = %ΔQD / %ΔY
    • What characterizes a luxury good in terms of YED?
      YED > 0, demand increases with income
    • What characterizes an inferior good in terms of YED?
      YED < 0, demand falls as income rises
    • What characterizes a normal good in terms of YED?
      YED > 0, demand increases with income
    • What does XED measure?
      Responsiveness of quantity demanded for good A to price of good B
    • What is the formula for XED?
      XED = %ΔQDA / %ΔPB
    • What does XED < 0 indicate?
      Complementary goods
    • What does XED > 0 indicate?
      Substitute goods
    • What does XED = 0 indicate?
      Unrelated goods
    • What is market equilibrium?
      • Prices determined by demand and supply interaction
      • Occurs when quantity demanded equals quantity supplied
    • What happens during excess demand?
      Price increases, generating more revenue
    • What does PED measure?
      Responsiveness of quantity demanded to price changes
    • What is the formula for PED?
      PED = %ΔQD / %ΔP
    • What factors influence PED?
      • Substitutability
      • Percentage of income
      • Necessities vs. luxuries
      • Time
      • Addictiveness
      • Peak/off-peak demand
    • What factors shift demand?
      • Population
      • Income
      • Related goods (substitutes and complements)
      • Advertising
      • Taste/fashion
      • Expectations
      • Season
    • What factors shift supply?
      • Productivity
      • Indirect tax
      • Number of firms
      • Technology
      • Subsidies
      • Weather
      • Cost of production
    • What does an outward shift in the supply curve indicate?
      Increase in supply
    • What does an inward shift in the supply curve indicate?
      Decrease in supply
    • What does the law of diminishing returns state?
      Opportunity cost increases when producing more
    • What indicates economic growth?
      • Outward shift of the production possibilities frontier
      • Increase in quantity/quality of resources
    • What indicates economic decline?
      • Inward shift of the production possibilities frontier
      • Decrease in quantity/quality of resources
    • What is productive efficiency?
      • All resources used to productive potential
      • Points on the boundary of the production possibilities frontier
    • What is allocative efficiency?
      • No one can be made better off without making someone worse off
      • Optimal use of scarce resources
    • What are close substitutes in cross price elasticity?
      • Small price increase of Y causes large rise in demand for X
    • What are weak substitutes in cross price elasticity?
      • Large price increase of Y leads to small increase in demand for X
    • What are close complements in cross price elasticity?
      • Small fall in price of A causes large rise in demand for B
    • What are weak complements in cross price elasticity?
      • Large drop in price of A causes small rise in demand for B
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