Economics IB

just vocab

PPC curve

production possibility curve

causes of movements along demand curves

Related products

Income

Preferences

Expectations

Number of consummers

what does it mean when an Item has high utility

it means it achieves great costumer satisfaction

what does marginal mean in economics

additional

marginal utility

how much consumer satisfaction increases from extra product

causes of shifts along the curve in supply

Cost of production
Indirect taxes
Subsidies
Technology
Expectation of change
Related goods ( competitive and joint supply)
Number of consumers

competitive supply

increase in supply of one product will lead to fall of another ( increase in cherry jam will lead to decrease in strawberry jam)

joint supply

an increase in supply for one will cause an increase supply for another product (beef and leather)

market equilibrium

no shortages or surpluses

Determinants of Price elasticity of supply

1. Mobility of the factors of production

2. The rate at which costs of production increase

3. Ability to store goods

4. Spare capacity

5. Time period
   

Income elasticity of demand

reveals how responsive the change in quantity demanded is to a change in income

factors of Price elasticity of demand

• Availability of substitutes: good availability of substitutes results in a higher value of PED (relatively elastic)

• Addictiveness of the product: addictiveness turns products into necessities resulting in a low value of PED (relatively inelastic)

• Price of product as a proportion of income: the lower the proportion of income the price represents, the lower the PED value will be. Consumers are less responsive to price changes on cheap products (relatively inelastic)

• Time period: In the short term, consumers are less responsive to price increases resulting in a low value of PED (relatively inelastic). Over a longer time period consumers may feel the price increase more and will then look for substitutes resulting in a higher value of PED (relatively elastic)

positive vs normative statements

• positive is objective which can be verified with facts and data

• normative is a value judgement based on opinions and beliefs

Opportunity cost question

• is allocatively efficient

• define opportunity cost

consummer surplus

the difference between the amount the consumer is willing to pay for a product and the price they have actually paid.