Economics (Mine)

• Framing


  By framing something in a different way, you create a different response.

  E.g. 10% fat or 90% fat free
• Law of Demand


  As price increases demand decreases.
• Substitutes


  Two goods that, if the price for one increases, the demand of the other will increase.
• Compliments


  Two goods that, if the price of A increases the demand for B decreases.
• Inferior Goods


  As income (Y) increases demand for the good decreases.
• Ostentatious Goods

  Luxurious goods where, as the price increases, so does the demand for the good.
• Consumer Surplus


  The differance between the price the consumer would be prepared to pay and the price they actually pay.
• Producer Surplus


  The differance between the price that producers would be prepared to supply at and the price they actually supply at.
• Specific Tax


  A lump sum that does not change in proportion to value.

  e.g Cigarettes, Beer, Petrol
• Ad Valorem Tax


  A tax that is a percentage of the value of the good. (20 %)

  e.g. VAT
• Elasticity


  The responsiveness of one variable to another.
• Price Elasticity of Demand (PED)


  The responsiveness of demand to a change in price.
• Calculation for PED


  % change in demand ÷ % change in price.
• Inelastic


  The responsiveness of demand/supply doesn't change much
• Equilibrium

  The state in which market supply and demand balance each other, and as a result prices become stable
• SPICED


  Strong Pound Imports Cheap Exports Dear
• WPIDEC

  Weak Pound Imports Dear Exports Cheap
• PINTSWCER (Factors which affect supply)


  Productivity Indirect taxes Number of firms Technology Subsidies

  Weather Cost of production Expectations Regulations
• PIRATES (Factors which affect demand)


  Population

  Income

  Related Goods

  Advertising

  Trends / Expectations Seasons
• Formula for Aggregate Demand (AD)

  AD = Consumption (C) + Investment (I) + Gov spending (G) + Exports - Imports (X-M)
• Factors which may change investment:

  Interest rates Rate of economic growth

  Expectations / Confidence Export demand

  Availability of credit Changes in technology
• Price mechanism

  Signalling

  Rationing

  Incentives
• Merit good


  A merit good is goods or services that are considered to be beneficial to individuals and society as a whole, but are often under-consumed in a free market economy. 

  
  

  e.g. Healthcare and Education
• Demerit good


  a good or service whose consumption is considered harmful to the consumer and 3rd parties.

  e.g. Tobacco and Alcahol

  may cause anti-social behaviour