1.2

Question 1

Factors leading to Changes in demand

Answer 1

Price of subsitute
Price of complimentary goods
Changes in consumer income
Fashion and trends
Seasons

Question 2

External shocks

Answer 2

-business can’t control

Competition
Gov (raise taxes)
Economic climate
Social and environmental factors

Question 3

Demand

Answer 3

The amount of product the customers are willing and able to purchase

Question 4

Inferior , normal and subsitute

Answer 4

• cheaper (demand will fall as income rises)
• cheaper (fall or rise as income rises)
• alternative but same function

Question 5

Factors leading to change in supply

Answer 5

-changes in cost of production
-new technology
-taxes
-external shocks

Question 6

PED formula

Answer 6

%change in quantity/price

Question 7

Elastic demand

Answer 7

Demand for product is sensitive to change in price

More than 1

Question 8

inealstic

Answer 8

Very little change due to price

Between 0-1

Question 9

YED (income elasticity of demand)

Answer 9

%change in demand/income

Inferior- less than 0
normal-0.1-1.5
Luxury- bigger than 1.5

Question 10

Supply

Answer 10

Is the quantity of a good or service that a producer is willing and able to supply

Question 11

Equilibrium

Answer 11

The state of balance between market demand and supply, no excess demand of supply