1.2 keywords

Question 1

demand

Answer 1

The amount of a good or service a consumer is willing and able to buy.

Question 2

supply

Answer 2

The quantity of a good/service that a supplier is able deliver within a specific time period.

Question 3

non price detriments of demand

Answer 3

Tastes and Preferences, Related Goods, Income, Population Size, External Shocks

Question 4

normal good

Answer 4

Goods for which sales move in line with income e.g. as income rises, demand increases

Question 5

luxury goods

Answer 5

Goods for which sales rise rapidly when people are better off but may fall rapidly in hard times.

Question 6

inferior goods

Answer 6

Goods for which sales fall as income rises e.g. Tesco’s own baked beans.

Question 7

demographics

Answer 7

Break down population data by age, ethnic origin or gender.

Question 8

external shocks

Answer 8

Unexpected changes in the market e.g. typhoon ruins crops.

Question 9

complimentary goods

Answer 9

Goods bought in conjunction with each other such as fish and chips.

Question 10

substitute goods

Answer 10

Goods in competition with each other e.g. Pespi and Coke

Question 11

seasonal variation

Answer 11

The change in the value of a variable that is related to seasons e.g. retail fashion stores, ice cream, Christmas trees.

Question 12

supply chain

Answer 12

The whole path from suppliers of raw materials through production and storage on to customer delivery.

Question 13

equilibrium

Answer 13

A state of rest in the market where supply meets demand.

Question 14

market price

Answer 14

The price of a commodity that has been established by the market (e.g. supply and demand meet at equilibrium).

Question 15

commodity market

Answer 15

The cover undifferentiated products such as rice, oil or gold - one kilo is the same as another.

Question 16

price elasticity of demand

Answer 16

A measure of the responsiveness of quantity demanded to a change in price.

PED = % Change in Quantity Demanded / % Change in Price

Question 17

Determinants of PED

Answer 17

HITS - Habit Forming, Proportion of Income, Time, Availability of Substitutes.

Question 18

price elastic

Answer 18

A product with demand that is highly price sensitive so a PED of over 1, e.g. If price changes, demand changes more proportionally than the change in price.

Question 19

price inelastic

Answer 19

A product with demand that is not very price sensitive so PED will be below 1. If prices are increased, customers remain loyal, e.g. tends to be where there is little competition or very strong brand names; necessities; commodities. If price changes, demand changes less proportionally than the change in price.

Question 20

predatory pricing

Answer 20

Pricing low with a deliberate intention of driving a competitor out of business.

Question 21

Income Elasticity of Demand (YED)

Answer 21

A measure of the responsiveness of quantity demanded to a change in income.

YED = % Change in Quantity Demanded / % Change in Income

Question 22

Positive Income Elasticity of Demand

Answer 22

Positive Income Elasticity of Demand

Implies a normal good e.g. as income rises, demand increases.

Question 23

Negative Income Elasticity of Demand

Answer 23

Implies an inferior good e.g. as income rises, demand decreases.