T1.2 0.0 / 5 ? EconomicsResource allocationASEdexcel Created by: StudentsamCreated on: 21-04-17 18:27 What are the underlying assumptions of rational economic decision making 1. Consumers aim to maximise utility 2. Firms aim to maximise profits 1 of 29 Explain the assumption that consumers aim to maximise utility . 2 of 29 Explain the distinction between movements along a demand curve and shifts of a demand curve . 3 of 29 List factors that may cause a shift in the demand curve (the conditions of demand) . 4 of 29 Explain the concept of diminishing marginal utility . 5 of 29 Explain how the concept of diminishing marginal utility influences the shape of the demand curve . 6 of 29 Explain what is meant by price elasticity of demand Price elasticity of demand is the responsiveness of demand for a good due to a change in its price 7 of 29 Give the formula to calculate price elasticity of demand %ΔQD ÷ %ΔP 8 of 29 Explain what is meant by a unitary elasticity of demand The demand curve is unitary elastic, if the percentage change in demand is the same as the percentage change in price. PED =1 9 of 29 Explain what is meant by a perfectly elastic price elasticity of demand . 10 of 29 Explain what is meant by a perfectly inelastic price elasticity of demand . 11 of 29 Explain what is meant by a relative elastic price elasticity of demand . 12 of 29 Explain what is meant by a relatively inelastic price elasticity of demand . 13 of 29 Explain what is meant by income elasticity of demand Income elasticity is the responsiveness of demand for a good due to a change in income 14 of 29 Give the formula for income elasticity of demand YED = %ΔQD ÷ %ΔY 15 of 29 Explain what is meant by an inferior good . 16 of 29 Explain what is meant by a normal good . 17 of 29 Explain what is meant by a luxery good . 18 of 29 Explain what is meant by relatively elastic price elasticity of demand . 19 of 29 Explain what is meant by relatively inelastic price elasticity of demand . 20 of 29 Explain what is meant by cross elasticity of demand Cross elasticity is the responsiveness in demand for good B due to a change in price of good A 21 of 29 Give the formula to calculate cross elasticity of demand XED = %ΔQD good B ÷ %ΔP good A. 22 of 29 Explain what is meant by a substitues . 23 of 29 Explain what is meant by a complimentary good . 24 of 29 Explain what is meant by an unrelated good . 25 of 29 List factos that influence PED . 26 of 29 List factors that influences YED . 27 of 29 List factors that influences XED . 28 of 29 Explain the assumnption that firms aim to maximise profit . 29 of 29
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