Economics Revision

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  • Created by: ElishaG
  • Created on: 12-05-19 11:09
What is the formula for aggregate demand?
AD= C + I + G + X - M
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What do each of the letters in the aggregate demand formula stand for?
AD= aggregate demand. C=consumer spending. I= Investment by firms. G= Government spending. X= Exports. I= Imports.
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What is the formula for coefficient of price elasticity of demand (PED)?
(percentage change in quantity demanded)/(Percentage change in price).
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How can PED be calculated if percentage change is not known?
(Change in quantity/mid quantity)/(Change in price/mid price)
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What are the elasticity values for PED?
PED>1=elastic. PED<1= Inelastic. PED=1 Unitary elastic
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What are the elasticity values for Income elasticity of demand (IED)?
IED>0 = normal good. IED<0 = inferior good. IED>1 =luxury good. 0<IED<1 = necessity
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What are the elasticity values for cross price elasticity of demand (CED)?
CED>0 =substitutes. CED<0 =complements.
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What are the elasticity values for price elasticity of supply (PES)?
PES>1 =elastic. PES<1 =ineastic. PES=1 unitary elastic.
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What is the equation for average fixed cost?
Total fixed cost/quantity.
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What is the equation for average variable cost?
Total variable cost/quantity.
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What is the equation for average total cost?
Total cost/quantity.
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What is the equation for marginal cost?
Change in total cost/change in quantity.
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What is the formula for total revenue?
Price x Quantity.
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What is the equation for average revenue?
Total revenue/total quantity
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What is the equation for marginal revenue?
(Change in revenue)/(change in quantity).
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What are three formulas for profit?
1) Total revenue-total cost. 2)(Price x average revenue)-(quantity x average total cost). 3)Quantity x (price-ATC).
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What is the formula for determining the price of a bond today?
Pt+1/(1+it)
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What is the equation for interest rate?
((Face value- bond price)/bond price) x 100.
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What are the 5 aims of government for the economy?
1)Economic growth. 2)Low inflation. 3)Low unemployment. 4)Balance of payments. 5)Balance in public finances.
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Briefly describe fiscal policy- aka Keynesian.
Expansionary- increase GS and/or reduce taxes to increase budget deficit. Deflationary- cut government expenditure and/or increase taxes.
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Briefly describe monetary policy.
Central banks alter interest rates and set reserve requirements for banks to manage money supply. Increase interest rates= more saving, less borrowing, decreased demand and inflation. Fall in interest- more spending and borrowing.
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List good things about the UK economy.
1)GDP 0.5% growth in Q1 2019.2)Size of economy increased since 2010.3)GDP per head increasing.4)3.9% unemployment- very low.5)Consumer spending driving forces of recovery.6)Service sector 80% of GDP.
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List bad things about the UK economy.
1)Decline in value against $. 2)Production sluggish since 2008.3)Interest base rate 0.75%, 0.5%=emergency level from 2009-2018.4)Employees in manufacturing industry declining.5)Construction sector decline.6)Spending cuts.7)no balance of trade.
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What are examples of withdrawals from the economy?
Net saving, net taxes, import expenditure.
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What are examples of injections into the economy?
Investment, government expenditure, export expenditure.
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What are the different types of unemployment?
Cyclical, frictional, structural and technological, seasonal and real wage.
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Describe cyclical unemployment.
Unemployment caused by aggregate demand in economy being too small to create jobs for those willing to work.
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Describe frictional employment.
People short-term unemployed as move from one job to another.
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Describe structural and technological unemployment.
Caused by structural change in economy, leading to change in skills required and location where activities occur.
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Describe seasonal unemployment.
Seasonal demand for workers, e.g. fruit pickers.
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Describe real wage unemployment.
Occurs in industries that are highly unionised. Keep wages high by threat of action and closed shops, employees in industry reduced.
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Other cards in this set

Card 2

Front

What do each of the letters in the aggregate demand formula stand for?

Back

AD= aggregate demand. C=consumer spending. I= Investment by firms. G= Government spending. X= Exports. I= Imports.

Card 3

Front

What is the formula for coefficient of price elasticity of demand (PED)?

Back

Preview of the front of card 3

Card 4

Front

How can PED be calculated if percentage change is not known?

Back

Preview of the front of card 4

Card 5

Front

What are the elasticity values for PED?

Back

Preview of the front of card 5
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