1.2 Flashcards
Define demand
The quantity of a good that consumers are willing and able to purchase at a given price at a given time.
Define a substitute product
Define a complement product
A similar, rival prooduct that consumers may choose instead
A product whose use accompnies another
List 6 factors that will affect Demand for a product
Price= Increase price, decreases demmand.
Taste (chnages)
Income
Substitute prices
Complementary prices
Define supply
The quantity of product or service a business are willing and able to supply at a particular point of time
List 4 factors that will affect supply of a product
Changes in costs of production
Introduction of new tech
Indirect taxes (taxes the gov imposes on goods and services)
External shocks (unexpected events such as poor harvests that cause an increase in price of an item)
Celt
Cost of production
External shocks
Legislation
Tech
Define PED (price elasticity of demand)
A measure of the responsiveness of demand for a product to a change in price (what happens if a business changes it’s selling price)
How do you calculate PED
%change in demand/ %change in price
Defind YED (income elasity of demand)
Income elasticity of demand measures the relationship between a change in quantity demanded for good X and a change in real income.
How do you calculate YED
%change in demand/ %change in real income
What goes on the Y axis of a demand curve graph
Price level
What goes on the X axis of a demand curve graph
Quantity
Define excess demand and excess supply
ED- Too much demand in relation to supply leads to a shortage
ES- Supply is greater than demand leads to a surplus
Define subsidies
A payment from the Government to aim to encourage production, boost exports, promote research, prevent a business from collapsing, or reduce unemployment. They are also introduced to make the price of a product more affordable to consumers.
What does a steep demand curve indicate a product is?
Price inelastic thus demand for the product is not responsive to a change in price.
What does a shallow demand curve indicate a product is?
Price elastic thus demand is responsive to a change in price.