1.2 Market

Question 1

Demand

Answer 1

Quantity goods or service customers are willing to buy at a given price

Question 2

Factors affecting demand

Answer 2

Substitude price
Income of cusotmer
Demoographics
Seasonality

Compliment prices
Advertising + branding
Fashion, trends, + preferences
External shocks

Question 3

Substitute good

Answer 3

Similiar products with same purpose

Question 4

Compliment Goods

Answer 4

Product with provides value to another product

Question 5

Supply

Answer 5

Amount of a good or servie businesses are willing to sell at any given price

Question 6

Factors Affecting Supply

Answer 6

Subsidies
Production costs changes
Indirect taxation
Technology
External shocks

Question 7

Price Easticity of Demand

Answer 7

How change in price affects demand

Question 8

PED =

Answer 8

% change in QD / % change in price

Question 9

PED is always

Answer 9

negative

Question 10

Price elastic =

Answer 10

Greater than -1 e.g. 1.1
Price sensitive
as price increases, demand decreases

Question 11

Price Inelastic =

Answer 11

Less than -1 e.g. -0.8
Price insensitive
As price increases, demand stays the same

Question 12

Factors affecting PED

Answer 12

• how addictive the product is
• availability of substitutes
• if it’s a necessity, comfort, or luxury
• price level
• proportion of income spent on good
• weather

Question 13

YED

Answer 13

Responsiveness of demand to a change in income

Question 14

YED =

Answer 14

% change in QD / % change in income

Question 15

+/ve YED =

Answer 15

Normal / lucury good

Question 16

-/ve YED =

Answer 16

Inferior good

Question 17

Normal / Luxury Good

Answer 17

Basic goods needed
as income increase demand increases

Question 18

Inferior Good

Answer 18

Buy if can afford
As income increases demand decreases

Question 19

Income Elastic =

Answer 19

More than -1e.g. -1.6
Income sensitive

Question 20

Income Inelastic =

Answer 20

Less than -1 e.g. -0.4
Income insensitive