QuestionQuestionConceptConceptDocumentDocument

2. The price system and the microeconomy

Start with Concept to understand a topic, then use Question Bank to check what you know.

5 topics · 28 learning objectives

Your progress

Sign in to see your mastery and mistakes.

  1. 2.1 Demand and supply curves

    1. 2.1.1Effective demand

      • Effective demand

    2. 2.1.2Individual and market demand/supply

      • Individual and market demand and supply

    3. 2.1.3Demand determinants

      • Determinants of demand

    4. 2.1.4Supply determinants

      • Determinants of supply

    5. 2.1.5Demand curve shifts

      • Causes of a shift in the demand curve (D)

    6. 2.1.6Supply curve shifts

      • Causes of a shift in the supply curve (S)

    7. 2.1.7Shifts vs movements

      • Distinction between the shift in the demand or supply curve and the movement along these curves

  2. 2.2 Price elasticity, income elasticity and cross elasticity of demand

    1. 2.2.1PED, YED and XED

      • Definition of price elasticity, income elasticity and cross elasticity of demand (PED, YED, XED)

    2. 2.2.2Elasticity formulae

      • Formulae for and calculation of price elasticity, income elasticity and cross elasticity of demand

    3. 2.2.3Elasticity coefficients

      • Significance of relative percentage changes, the size and sign of the coefficient of: - price elasticity of demand - income elasticity of demand - cross elasticity of demand

    4. 2.2.4Elasticity values

      • Descriptions of elasticity values: perfectly elastic, (highly) elastic, unitary elasticity, (highly) inelastic, perfectly inelastic

    5. 2.2.5PED on straight-line demand

      • Variation in price elasticity of demand along the length of a straight-line demand curve

    6. 2.2.6Elasticity determinants

      • Factors affecting: - price elasticity of demand - income elasticity of demand - cross elasticity of demand

    7. 2.2.7PED and total expenditure

      • Relationship between price elasticity of demand and total expenditure on a product

    8. 2.2.8Elasticity and decision-making

      • Implications for decision-making of price elasticity, income elasticity and cross elasticity of demand

  3. 2.3 Price elasticity of supply

    1. 2.3.1Price elasticity of supply

      • Definition of price elasticity of supply (PES)

    2. 2.3.2PES formula

      • Formula for and calculation of price elasticity of supply

    3. 2.3.3PES coefficient

      • Significance of relative percentage changes, the size and sign of the coefficient of price elasticity of supply

    4. 2.3.4PES determinants

      • Factors affecting price elasticity of supply

    5. 2.3.5PES and firm response speed

      • Implications for speed and ease with which firms react to changed market conditions

  4. 2.4 The interaction of demand and supply

    1. 2.4.1Market equilibrium

      • Definition of market equilibrium and disequilibrium

    2. 2.4.2Demand/supply shifts and equilibrium

      • Effects of shifts in demand and supply curves on equilibrium price and quantity

    3. 2.4.3Relationships between markets

      • Relationships between different markets: - joint demand (complements) - alternative demand (substitutes) - derived demand - joint supply

    4. 2.4.4Price functions in allocation

      • Functions of price in resource allocation; rationing, signalling (transmission of preferences) and incentivising

  5. 2.5 Consumer and producer surplus

    1. 2.5.1Consumer surplus

      • Meaning and significance of consumer surplus

    2. 2.5.2Producer surplus

      • Meaning and significance of producer surplus

    3. 2.5.3Surplus changes

      • Causes of changes in consumer and producer surplus

    4. 2.5.4Elasticity and surplus changes

      • Significance of price elasticity of demand and of supply in determining the extent of these changes