IB Higher Level Microeconomics Exam Revision - Custom Scholars
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# IB Higher Level Microeconomics Exam Revision

question
Demand
describes a consumer's ability and willingness to purchase a specific product or service at a certain price level, at a specific point in time.
question
The Law of Demand
states that a negative relationship exists between the price of a good and the correlated quantity demanded of the good, ceteris paribus.
question
Supply
describes producers' ability and willingness to supply the market with different quantities of specific products at different prices.
question
The Law of Supply
states that there will be a positive correlation between a good's market price and the quantity produced, ceteris paribus.
question
Market Equilibrium
describes the intercept between the supply and the demand curve, where a theoretical market left to its own devices will congregate in terms of price and quantity.
question
Consumer surplus
is the extra utility gained by consumers when they purchase a good at a lower price than what they are willing to pay.
question
Producer surplus
is the extra earnings gained by producers when they are able to sell their goods at a higher price than what they are willing to pay.
question
Maximum Price
is an artificially low price (below equilibrium) set by an authority (government) when it deems the market price too high.
question
Minimum Price
is an artificially high price (above equilibrium) set by an authority (government) when it deems the market price too low.
question
Price Elasticity of Demand (PED)
is a measure of a good's responsiveness in terms of quantity demanded when there is a change in price. PED= % change in Qd/ % change in P
question
Price Elasticity of Supply (PES)
is a measure of a good's responsiveness, in terms of quantity supplied when there is a change in price.
PES= % change in Qs/ % change in P
question
Cross Price Elasticity of Demand (XPE)
is a measure of good X's responsiveness in terms of quantity demanded when there is a change in the price of good Y.
XPE= % change in Qd of good X/ % change in P of good Y
question
Income Elasticity of Demand (yED)
is a measure of a good's responsiveness in terms of quantity demanded when there is a change in income.
yED= % change in Qd/ % change in y
question
Flat Rate Tax
a tax where every unit is levied at the same amount. Often the tax is placed on weight (per kilo).
question
a value added tax, which positively increases with the price of the good. Most often a percentage (VAT).
question
Subsidies
is a monetary grant from governments and firms.
question
The Law of Diminishing Returns
states that if 1 factor is fixed, the marginal product yielded from additional variable input will eventually diminish.
question
Revenue
is a monetary measure of a firm's income, received by selling its goods and services.
question
Total Revenue Formula
TR = P * Q
question
Average Revenue Formula
AR = P*Q/R = P
question
Marginal Revenue Formula
MR = change in TR/ change in Q
question
Costs
are the expenses incurred for a firm, monetary or otherwise, as a consequence of production.
question
Total Cost formula
TC = TVC + TFC (total variable + total fixed)
question
Average Cost formula
AC = TC/Q
question
Marginal Cost Formula
MC = change in TC/ change in Q
question
Perfect competition market
is defined by its assumptions, namely that the market is host to a very large number of small firms where no single firm is large enough to influence the market price.
question
Monopoly
is a market structure defined by its assumptions, namely that the market consists of a single, powerful firm that has price-setting power.
question
Monopolistic competition
is a market structure defined by its assumptions, namely that the market is host to a few, very powerful firms, each with considerable price-setting power. The market is characterised by large barriers to entry.
question
Price discrimination
is the act of selling the exact same good to different consumers at different prices.
question
imperfect competition
theoretically, a market left to its own devices will establish equilibrium at the intercept of supply and demand. A firm with market power may hinder this, creating an efficiency loss and market failure.
question
externalities
exists when the production or consumption of a good has an (unaccounted for) effect on a third party.
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question
Demand
describes a consumer's ability and willingness to purchase a specific product or service at a certain price level, at a specific point in time.
question
The Law of Demand
states that a negative relationship exists between the price of a good and the correlated quantity demanded of the good, ceteris paribus.
question
Supply
describes producers' ability and willingness to supply the market with different quantities of specific products at different prices.
question
The Law of Supply
states that there will be a positive correlation between a good's market price and the quantity produced, ceteris paribus.
question
Market Equilibrium
describes the intercept between the supply and the demand curve, where a theoretical market left to its own devices will congregate in terms of price and quantity.
question
Consumer surplus
is the extra utility gained by consumers when they purchase a good at a lower price than what they are willing to pay.
question
Producer surplus
is the extra earnings gained by producers when they are able to sell their goods at a higher price than what they are willing to pay.
question
Maximum Price
is an artificially low price (below equilibrium) set by an authority (government) when it deems the market price too high.
question
Minimum Price
is an artificially high price (above equilibrium) set by an authority (government) when it deems the market price too low.
question
Price Elasticity of Demand (PED)
is a measure of a good's responsiveness in terms of quantity demanded when there is a change in price. PED= % change in Qd/ % change in P
question
Price Elasticity of Supply (PES)
is a measure of a good's responsiveness, in terms of quantity supplied when there is a change in price.
PES= % change in Qs/ % change in P
question
Cross Price Elasticity of Demand (XPE)
is a measure of good X's responsiveness in terms of quantity demanded when there is a change in the price of good Y.
XPE= % change in Qd of good X/ % change in P of good Y
question
Income Elasticity of Demand (yED)
is a measure of a good's responsiveness in terms of quantity demanded when there is a change in income.
yED= % change in Qd/ % change in y
question
Flat Rate Tax
a tax where every unit is levied at the same amount. Often the tax is placed on weight (per kilo).
question
a value added tax, which positively increases with the price of the good. Most often a percentage (VAT).
question
Subsidies
is a monetary grant from governments and firms.
question
The Law of Diminishing Returns
states that if 1 factor is fixed, the marginal product yielded from additional variable input will eventually diminish.
question
Revenue
is a monetary measure of a firm's income, received by selling its goods and services.
question
Total Revenue Formula
TR = P * Q
question
Average Revenue Formula
AR = P*Q/R = P
question
Marginal Revenue Formula
MR = change in TR/ change in Q
question
Costs
are the expenses incurred for a firm, monetary or otherwise, as a consequence of production.
question
Total Cost formula
TC = TVC + TFC (total variable + total fixed)
question
Average Cost formula
AC = TC/Q
question
Marginal Cost Formula
MC = change in TC/ change in Q
question
Perfect competition market
is defined by its assumptions, namely that the market is host to a very large number of small firms where no single firm is large enough to influence the market price.
question
Monopoly
is a market structure defined by its assumptions, namely that the market consists of a single, powerful firm that has price-setting power.
question
Monopolistic competition
is a market structure defined by its assumptions, namely that the market is host to a few, very powerful firms, each with considerable price-setting power. The market is characterised by large barriers to entry.
question
Price discrimination
is the act of selling the exact same good to different consumers at different prices.
question
imperfect competition
theoretically, a market left to its own devices will establish equilibrium at the intercept of supply and demand. A firm with market power may hinder this, creating an efficiency loss and market failure.
question
externalities
exists when the production or consumption of a good has an (unaccounted for) effect on a third party.

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