1.2 market Flashcards
what is demand?
- the quantity of goods or services that consumers are willing and able to buy at any given price
what are the conditions of demand?
- population
- income
- related goods
- advertising
- tastes
- expectations
- season
how do you remember conditions of demand?
- PIRATES
what can a change in price lead to?
- an extension/contraction in demand
what is supply?
- shows the quantity of goods that suppliers are willing to sell at any given price
an increase in price will lead to a what of supply?
- extension
what do the conditions of supply all effect?
- unit costs
what are the conditions of supply?
- cost of production
- other (legislations)
- price of other goods
- technology
how do you remember conditions of supply?
- COPT
what direction will the supply curve shift to indicate that there is a reduction in quantity supplied at every given price?
- left
what direction is the demand curve?
- downward slopping
what is the equilibrium in the market?
- everything made is being sold #
- ‘market clearing’ price
what will happen if there’s an excess of demand?
- price will rise to new market clearing
- a new equilibrium will be created
what will happen if there’s an excess supply?
- price must fall to the new market clearing price
what is an excess demand?
- price decreases which leads to an excess demand and suppliers aren’t willing to supply Q2
what is price elasticity of demand?
- the responsiveness of changes in quantity demanded in relation to change in price
what’s the formula for price elasticity of demand?
percentage change in price
what’s the formula for percentage change?
new value - original value
————————————- X 100
original value
what is PED greater than 1?
- price elastic
what is price elastic?
- a change in price leads to a greater than proportionate change in demand
what is a PED between 0 and 1?
- price inelastic
what is price inelastic?
- a change in price leads to a lesser than proportionate change in demand
what is a PED of 1?
- unit elasticity
what is unit elasticity?
- a change in price leads to an exactly proportionate change in demand
what is a PED of ∞?
- perfectly elastic
what is perfectly elastic?
- producers can sell as much as they want at the current price
what is a PED of 0?
- perfectly inelastic
what is perfectly inelastic?
- consumers are willing to pay and price for a given amount
what is quantitative data?
- concerned with data
- based on larger samples, therefore more valid
what are example of finding quantitative data?
- surveys
- telephone
- postal
what is qualitative data?
- based on opinions, attitudes, beliefs and intentions
what are examples of gathering qualitative data?
- focus groups
- interviews
what is sampling?
- involves the gathering of data from a sample of respondents
- looks at target market
what will a fall in price lead to?
- a rise in quantity demanded
If PED is bigger than 1 what will a price fall lead to?
- rise in revenue
if PED is less than 1 a price fall will lead to a?
- fall in revenue
what factors determine PED of a product?
- number of close substitutes
- price of product in relation to income
- brand loyalty
- degree of necessity/luxury
- cost of substitutes
what is income elasticity of demand?
- measure the responsiveness between a change in quantity demanded for good x and change in real income
what’s the formula for income elasticity of demand?
% change in income
what has a YED of less than 1?
- inferior goods
what has a YED of 0-1?
- normal goods
what YED is 0-1?
- income inelastic demand
what happens with demand of a product of <1?
- as income rises the demand for the product will fall
what has a YED of +1?
- normal good
what YED is +1?
- income elastic demand
what YED does normal necessities have?
- low but positive
what YED does a normal luxury have?
- high and positive
what YED does a inferior good have?
- negative
what can be the affects of a businesses selling high YED products?
- sales may fluctuate with the business cycle
what can be the affects of a business selling low YED products?
- more stable demand with changes in income
