1.2 Market Flashcards
factors that lead to a change in demand
population
incomes
related goods
advertising
trends
expectations
seasonality
factors that lead to a change in supply
productivity
indirect taxes
number of firms
technological advancements
subsidies
weather
cost of production
supply
the quantity of a good or service that a producer is willing and able to make available on the market, at a given price, over a given period of time
demand
the quantity of a good that consumers are willing and able to buy at a given price at a given time
market clearing price
equilibrium price point
the price at which consumers are willing to buy a product and producers are willing to sell the product
what is a surplus
when supply exceeds demand
this could be due to prices being too high
what is a shortage
when demand exceeds the supply
could be due to panic buying or the price being too low, increasing D
what is the relationship between demand and price
when price is high for a product, there is less demand, when price is low, there is lots of demand - extremities of this lead to surplus and shortage
PED
how sensitive a product is to a change in price
formula for ped
PED = %change of qd / % change of price
what are elastic products
products that are sensitive to price change - they have lots of competition and tend not to have a large market share. i,e disney+
what are inelastic products
products that are not sensitive to price change. i,e petrol
what coefficient values are inelastic
values less that 1 - i.e 0.77
what coefficient values are inelastic
values greater than 1 i.e 3.22
factors that affect ped (FLAN)
frequency of purchase
luxury goods
availability of subs
necessities
what is competitive pricing
firms pricing products similar to competitors - this means consumers will have to pick the service based on other factors like customer service
what is skimming pricing
products launched early on a market with little competition can charge higher prices before competition enters the market.
they have a USP
YED
how sensitive demand is to changes in average income
relation between demand and income
as real income rises, so will demand as people will have more disposable income after taxes
yed formula
YED = % change in qd / % change in income
what is a normal good
a good that demand increases when incomes increase
>0
kelloggs cereal
what is an inferior good
a good that demand decreases when income increases
<0 (negative)
own label baked beans
what is a luxury good
a good that demand increases when incomes increase
>1
luxury handbags
