Economics

Conditions of demand/non-price determinants of demand

Habits/fashions/tastes, income, substitutes and complements prices, advertising, government policies, economy, weather, size and demographics of population

Movements along demand curve

Contraction - increase in price leading to fall in qd, moves left
Extension - decrease in price leading to increase in qd, moves right

Conditions of supply/non-price determinants of supply

Time period, weather, opportunity cost, taxes, innovations, production costs, subsidies

Movements along supply curve

Extension - increase in price leading to increase in qs, moves right
Contraction - fall in price leading to fall in qs, moves left

PED =

% change in quantity demanded / % change in price

PED is presented as…

positive

PED = 0

Perfectly inelastic (only in theory) (vertical)

0<PED<1

Relatively inelastic (steep)

PED = 1

Unitary elasticity (curve)

PED>1

Relatively elastic (gradual)

PED = infinity

Perfectly elastic (only in theory) (horizontal)

Determinants of PED

Availability of substitutes, addictiveness, price as proportion of income, time period

PES =

% change in quantity supplied / % change in price

PES = 0

Perfectly inelastic (vertical)

0<PES<1

Relatively inelastic (steep)

PES>1

Relatively elastic (gradual)

PES = infinity

Perfectly elastic (only in theory) (horizontal line)

PES = 1

Unitary elasticity (any supply curve that starts at the origin)

Determinants of PES

Mobility of factors of production, availability of raw materials, ability to store goods, spare capacity, time period

GDP =

consumption + investment + government spending + (exports - imports) // C + I + G + (X-M)

Nominal GDP vs Real GDP

Nominal is actual value of goods/services produced in an economy in a year, real is value of goods/services produced in an economy in a year adjusted for inflation

Structural unemployment

When the demand for products produced in a particular industry continually falls, often due to foreign competition

Frictional unemployment

Transitional unemployment which occurs when people change jobs or are in-between jobs

Cyclical unemployment

Caused by a lack of demand, which causes a fall in national income

Claimant count

Measures the number of people who are out of work and claiming unemployment benefits

Labour force survey

Uses the ILO’s standardised household-based survey to collect work-related statistics

Inflation

The sustained rise in the general level of prices of goods and services over time, as measured by a consumer price index

Hyperinflation

Very high rates of inflation that are out of control causing average prices in the economy to rise very rapidly

Deflation

The sustained fall in the general price level in an economy over time, the inflation rate is negative

Consumer Price Index

A weighted index of consumer prices in the economy over time. It is used to measure the cost of living for an average household.

Supply curve shifting left means

Increase in rpcie

Supply curve shifting right means

Decrease in price

Demand curve shifting left means

Decrease in price

Demand curve shifting right means

Increase in price