1.2 Flashcards
Demand
Amount of a product or service that customers are willing and able to pay for at a given time
Factors effecting demand
- Substitute goods
- Complementary goods
- Change in customer income
- Fashion and trends
- Advertising
- Demographics
- Ageing population
- External shocks
Supply
Quantity of a good/service that a producer is wiling and able to sell at a given price over a given period of time
Causes:
- Cost of production
- External shocks
- New technology
- Taxation and subsidies
Supply and demand graph
Represents the relationship between how much of a product is available to a market and how much the consumers in a market want the product
Price elasticity of demand
How much individuals/groups change their demand/amount supplied based on price changes
Change in quantity demanding/Change in price
Income elasticity of demand
Change of quantity demanded for certain good to change in income of consumers who buy it
Change in quantity demanding/Change in income
Factors effecting PED
- Availability of substitutes
- If the good is a luxury or a necessity
- The proportion of income spent on the good
- How much time has elapsed since the time the price changed
Factors effecting IED
- Degree of necessity of the good
- Rate at which the desire for the good is satisfied as consumption increases
- Level of income of consumers.
Demand curve
How much of a good will be bought at different prices
Supply curve
How much of a good sellers are willing to supply at different prices
Equilibrium price
The price where supply and demand are equal
Excess demand
The position where demand is greater than supply at a given price and there are shortages in the market
Excess supply
The position where supply is greater than demand at a given price and there are unsold goods in the market
Complimentary goods
Goods that are purchased together because they are consumed together
Substitute goods
Goods that can be bought as an alternative to others, but perform the same function
