1.2 Markets Flashcards
Definition of Demand
Quantity of a product that consumers are able and willing to purchase goods/services
Relationship between demand and price
As prices falls consumers will demand more
Price rise consumers demand fall
Factors affecting demand
Changes in the prices of substitutes and complements
Scarcity of the product good
Changes in consumer incomes
Fashions, tastes and preferences
Advertising and branding
Demographics
External shocks
Seasonality
Definition of Normal Good
Goods for which an increase in income leads to an increase in demand
Definition of Inferior goods
Goods for which an increase in income leads to a fall in demand
Definition of Supply
The quantity of a product that producers are willing and able to provide
What is the relation between supply and price
As price rise supply rises
As price falls supply falls
Factors affecting supply
A change in the cost of production
Introduction of new technology
Indirect tax
Government subsidies
External shocks
Definition of Costs of Production
The total cost incurred by a business to produce a specific quantity
Definition of Indirect Taxes
Mains one in the UK are VAT and Duty
Definition of Government Subsidies
The government provide firms funding toward supply
Examples of external shocks
Weather
Worlds events
Government
Definition of Equilibrium Price
The price at which supply is equal to demand
Definition of Excess demand
Shortage of goods in the market (more demand than supply)
Excess supply
A surplus of goods in the market
