A LEVEL ECONOMICS PROFESSIONAL
EXAM PREP QUESTIONS AND ACCURATE
ANSWERS GRADED A+
●● The Law of Supply
Answer: producers offer more of a good as its price increases and less as
its price falls
●● Equilibrium Price
Answer: the price at which the quantity demanded equals the quantity
supplied
●● Excess Supply
Answer: the amount by which quantity supplied exceeds quantity
demanded when the price of a good exceeds the equilibrium price
●● Surplus
Answer: A situation in which quantity supplied is greater than quantity
demanded
●● Excess Demand
Answer: The situation that exists when demand is greater than supply.
,●● Deficit
Answer: A situation in which quantity supplied is less than the quantity
demanded
●● Economics
Answer: A social science that studies how people seek to satisfy their
needs and wants by making choices
●● Price Elasticity of Demand
Answer: a measure of how much the quantity demanded of a good
responds to a change in the price of that good.
●● Income Elasticity of Demand
Answer: a measure of the responsiveness of the quantity demanded to
changes in income.
●● Cross Price Elasticity of Demand
Answer: measures the response of demand for one good to changes in
the price of another good
●● PED Formula
Answer: % change in quantity demanded / % change in price
,●● YED Formula
Answer: % change in quantity demanded / % change in income
●● XED Formula
Answer: % change in quantity demanded of good X / % change in price
of good Y
●● Luxury Good
Answer: a good with an income elasticity greater than 1 for which
demand rises by a greater amount than the rise in income.
●● Normal Good
Answer: a good for which the demand increases as income rises and
decreases as income falls
●● Veblen Good
Answer: A good with a positively sloped demand curve. As price
increases people buy more of these goods to demonstrate their social
status.
●● Inferior Good
Answer: a good for which, other things being equal, an increase in
income leads to a decrease in demand
, ●● Substitute Good
Answer: A good that can be used in place of another good
●● Complementary Good
Answer: Products and services that are used together. When the price of
one falls, the demand for the other increases (and conversely).
●● Positive Economic Statement
Answer: A statement that can be proved or disproved by reference to
facts
●● Normative Economic Statement
Answer: A statement that reflects on opinion, which cannot be proved or
disproved by reference to the facts.
●● Production Possibilities Frontier (PPF)
Answer: a diagram that shows the productively efficient combinations of
two products that an economy can produce given the resources it has
available
●● Opportunity Cost
Answer: The cost of the next best alternative forgone.
EXAM PREP QUESTIONS AND ACCURATE
ANSWERS GRADED A+
●● The Law of Supply
Answer: producers offer more of a good as its price increases and less as
its price falls
●● Equilibrium Price
Answer: the price at which the quantity demanded equals the quantity
supplied
●● Excess Supply
Answer: the amount by which quantity supplied exceeds quantity
demanded when the price of a good exceeds the equilibrium price
●● Surplus
Answer: A situation in which quantity supplied is greater than quantity
demanded
●● Excess Demand
Answer: The situation that exists when demand is greater than supply.
,●● Deficit
Answer: A situation in which quantity supplied is less than the quantity
demanded
●● Economics
Answer: A social science that studies how people seek to satisfy their
needs and wants by making choices
●● Price Elasticity of Demand
Answer: a measure of how much the quantity demanded of a good
responds to a change in the price of that good.
●● Income Elasticity of Demand
Answer: a measure of the responsiveness of the quantity demanded to
changes in income.
●● Cross Price Elasticity of Demand
Answer: measures the response of demand for one good to changes in
the price of another good
●● PED Formula
Answer: % change in quantity demanded / % change in price
,●● YED Formula
Answer: % change in quantity demanded / % change in income
●● XED Formula
Answer: % change in quantity demanded of good X / % change in price
of good Y
●● Luxury Good
Answer: a good with an income elasticity greater than 1 for which
demand rises by a greater amount than the rise in income.
●● Normal Good
Answer: a good for which the demand increases as income rises and
decreases as income falls
●● Veblen Good
Answer: A good with a positively sloped demand curve. As price
increases people buy more of these goods to demonstrate their social
status.
●● Inferior Good
Answer: a good for which, other things being equal, an increase in
income leads to a decrease in demand
, ●● Substitute Good
Answer: A good that can be used in place of another good
●● Complementary Good
Answer: Products and services that are used together. When the price of
one falls, the demand for the other increases (and conversely).
●● Positive Economic Statement
Answer: A statement that can be proved or disproved by reference to
facts
●● Normative Economic Statement
Answer: A statement that reflects on opinion, which cannot be proved or
disproved by reference to the facts.
●● Production Possibilities Frontier (PPF)
Answer: a diagram that shows the productively efficient combinations of
two products that an economy can produce given the resources it has
available
●● Opportunity Cost
Answer: The cost of the next best alternative forgone.
