A-level Economics Edexcel keywords

Set 2

what does PIRATES stand for

population, income, related goods, advertising, trends, expectations and seasons

what is derived demand

where the demand for one good is linked to the demand for a related good

what is composite demand

when the good demanded has more than one use

what is joint demand

when goods are bought together

what are Veblen goods

luxury goods or superior goods whose demand does not follow the typical economic laws of supply and demand e.g. goods prices rise = more demand

what are Giffen goods

a type of product that experiences an increase in demand as its price rises

what is ceteris paribus

all other things being equal

what is the demand curve

a line showing the inverse relationship between price and quantity demanded

what is the income effect

when price of a g/s changes the consumer can maintain same consumption for less expenditure making them feel richer

what is real income

income of individuals or nations after adjusting for inflation

what is the substitution effect

when price of a g/s falls the product is now relatively cheaper so consumers will switch from the alternative g/s

what is PED

the responsiveness of quantity to a change in price

what’s the formula for PED

 % change in QD / % change in P

what is a normal good

product whose demand increases as consumer income rises

what value is perfectly price inelastic and what does it mean

0 - QD does NOT change at all when price changes

what value is relatively price inelastic and what does it mean

0 to -1 means % change in QD is smaller than the % change in P

what value is unit price elastic and what does it mean

-1 and means the % change in QD is exactly the same as the % change in P

what value is relatively price elastic and what does it mean

-1 to -∞ and means the % change in QD is larger than the % change in P

what is the value for perfectly price elastic and what does it mean

QD falls to 0 if the price rises

what factors affect PED

number of close substitutes, cost of switching between products, degree of necessity , habitual consumption