Micro economics Definitions AQA A level Economics Exam Questions and Answers |Complete
Solutions Graded A+ |100% Correct
asymmetric information a situation in which one side of the market has more reliable
information than the other side
bounded rationality When making decisions, an individual's rationality is limited by the
information they have, the limitations of their minds, and the finite amount of time available in
which to make decisions
Bounded self control Individuals lack control to act in what they see as their self interest
availability bias the tendency for people to base their judgments on information that is
readily available to them
Social norms behavioural expectations or rules within a group
Demand the quantity of a good or service that consumers are willing and able to buy at a
given price per period
Supply the quantity of a good or service that businesses are willing and able to provide at a
given price per period
market the institution through which buyers and sellers interact and engage in exchange
equilibrium the price at which quantity demanded meets quantity supplied
citrus paribus all other factors remaining constant
, Disequilibrium a combination of price and quantity traded which has a tendency to change
for given demand and supply conditions
joint demand When the demand for one product increases the demand for another.
Joint supply when one good is produced, another good is also produced from the same raw
materials
derived demand demand for a product which is demanded only because of demand for final
;product it contributes to
composite demand Where a good is demanded for two or more separate uses
price elasticity of demand the responsiveness of quantity demanded to a change in price
PED = % change in quantity demanded / % change in price
If PED is greater than 1 (ignore minus) demand is relatively elastic
If PED less than 1 (ignore minus) demand is relatively inelastic
income elasticity of demand The responsiveness of demand to a change in income
YED % change in quantity demanded / % change in income
If YED is positive normal good
Solutions Graded A+ |100% Correct
asymmetric information a situation in which one side of the market has more reliable
information than the other side
bounded rationality When making decisions, an individual's rationality is limited by the
information they have, the limitations of their minds, and the finite amount of time available in
which to make decisions
Bounded self control Individuals lack control to act in what they see as their self interest
availability bias the tendency for people to base their judgments on information that is
readily available to them
Social norms behavioural expectations or rules within a group
Demand the quantity of a good or service that consumers are willing and able to buy at a
given price per period
Supply the quantity of a good or service that businesses are willing and able to provide at a
given price per period
market the institution through which buyers and sellers interact and engage in exchange
equilibrium the price at which quantity demanded meets quantity supplied
citrus paribus all other factors remaining constant
, Disequilibrium a combination of price and quantity traded which has a tendency to change
for given demand and supply conditions
joint demand When the demand for one product increases the demand for another.
Joint supply when one good is produced, another good is also produced from the same raw
materials
derived demand demand for a product which is demanded only because of demand for final
;product it contributes to
composite demand Where a good is demanded for two or more separate uses
price elasticity of demand the responsiveness of quantity demanded to a change in price
PED = % change in quantity demanded / % change in price
If PED is greater than 1 (ignore minus) demand is relatively elastic
If PED less than 1 (ignore minus) demand is relatively inelastic
income elasticity of demand The responsiveness of demand to a change in income
YED % change in quantity demanded / % change in income
If YED is positive normal good
