Elasticity Olympics
what does it mean if PED is bigger than 1
demand is price elastic
What does GDP stand for?
Gross Domestic Product
what is the main difference between economic growth and economic development?
Growth is increase in output while development is improvement in quality of life, education, and health
what is the law of demand
if price increases, demand decreases. ceteris parabus
What are the 3 basic economic questions
if the government want to increase tax revenue, should it tax elastic or inelastic goods and why?
inelastic, consumers will continue buying them even at higher prices
Name one limitation of using GDP to measure living standards
it does not consider income inequality, quality of life or informal markets
Human Development Index
give 3 non-price determinants of demand
income, tastes/preferences, prices of related goods, expectations, number of buyers
What is the main goal of monopolists
to maximize profit
a 10% increase in income leads to 20% increase in demand for a good, so what is the YED and what type of good is it?
YED=2, luxury good
if a country has high unemployment and failing output, what phase of the business is it likely in?
recession
give one reason why overdependance on primary goods can hinder development
what is the effect of a price floor above the equilibrium price
surplus
why does government provide public goods?
they are non rivalrous and non excludible, so private markets would not provide them efficiently.
explain one reason why primary commodities tend to have a lower PES
they take time to produce and store, production is inflexible in the short run
what is the difference between fiscal and monetary policy?
builds human capital, increases productivity, boosts income, improve standard of living
describe what happens to the supply curve when there is a technological advancement
shift to the right
Identify 3 consequence of income inequality on economic development
it can reduce social mobility, create instability, limit access to education and healthcare
differentiate between YED and PED values
PED measures how much the quantity demanded of a good changes when its price changes, YED measures how much the quantity demanded changes when consumer income changes
explain how an increase in interest rates can control inflation
higher interest causes less borrowing and more saving leading to lower consumption and investment which reduces demand-pull inflation
what are underprovision of merit goods and income inequality
These 2 types of market failure where one involving access to essential services and the other involving wealth inequality which are major structural barriers to development in many low-income countries.
Explain why imposing a price ceiling might lead to a black market
because at the lower legal price there is excess demand and not enough supply so sellers might illegally charge higher prices
who is the big daddy of economics
adam smith