1.2 Market

Question 1

Factors leading to changes in demand:

Answer 1

Changes in consumer incomes : when income rises demand Changes in the price of substitutes and complementary goods
for goods will also rise
Fashions , tastes and preference
Advertising and branding
Demographics e.g. age distribution, gender distribution, Geographical distribution
External shocks : competition, government, economic climate change , social and environmental factors
Seasonality : means demand changes at particular time of the year

Question 2

Construct a demand graph

Question 3

Construct a supply graph

Question 4

Factors leading to a change in supply

Answer 4

Changes in the cost of production e.g. wages, raw materials, energy and machinery
Introduction of new technology
Indirect taxes e.g. VAT
Government subsidies E.g. grants
External shocks : world events, weather, government , price of related goods

Question 5

Equilibrium price

Answer 5

the price where supply and demand are equal

Question 6

Price elasticity of demand=

Answer 6

Percentage change in quantity demanded / percentage change in price

Question 7

Factors influencing price elasticity of demand

Answer 7

Time
Competition for the same product
Branding
The proportion of income spent on a product

Question 8

Income elasticty of demand =

Answer 8

= Percentage change in quantity demanded/ percentage change in income

Question 9

Factors influence income elasticity of demand

Answer 9

Necessities
Luxuries
The price of a product relative to incomes