What affects PED
Habit forming
Income (% income spent on good)
Necessity
Time (demand tends to become more elastic over time as more substitutes are created e.g. alternative energy)
Substitutes
HINTS
What are the ranges for PED and what do they mean
between -1 and -inf:
elastic - demand is very responsive to a change in price
between 0 and -1
inelastic - demand is not very responsive to a change in price
-1:
unitary: Any increase in the price will be matched by a fall in quantity demanded by the same percentage
What are the ranges for PES and what do they mean
> 1 = elastic
<1 = inelastic
0 = Perfectly Inelastic
Between 0 and 1 = Relatively Inelastic
1 = Unitary Elastic
Greater than 1 = Relatively Elastic
Infinity = Perfectly Elastic
different types of economies of scale + meanings
risk bearing
financial - larger firms have more assets - easier to attain loans
marketing
technical (capital)
managerial - larger firms can hire specialists instead of generalists
purchasing (bulk buying)
RFMTMP
What factors determine an individuals pay and what do they mean
skills of labour - high skill = high Barriers of entry so lower supply relative to demand so higher pay
competition - higher competition means lower pay as theres substitutes
age - older = more experience so higher pay
location - some locations mean higher or lower demand
elasticity of demand - if demand is inelastic pay high incase its a need or little substitutes (ie: doctors)
SCALE
What policies can be used to correct market failure + explain last one
Legislation
information
subsidies
taxation
state provision - if the free market doesnt produce enough of one good the state will (ie: vaccines)
LISTS
