1.2 S/D PED YED Flashcards
Definition of Demand
The number of goods customers are willing to buy at a given price
Describe the inverse relationship between quantity demanded and price
-As price increases, quantity decreases
-As price decreases, quantity increases
7 Non-Price Factors affecting Demand
-Changes in fashion/tastes
-Seasonality
-External Shocks
-Changing Demographics
-Changes to Income
-Advertising and Branding
-Price of Substitutes and Complements
Define a Substitute
A similar, rival, product consumers may choose instead
Define a Complement
A product that accompanies another
In a SD Diagram, if demand increases, how does the diagram change
The new demand line is to the right of the original
0\ \1
In a SD Diagram, if demand decreases, how does the diagram change
The new demand line is to the left of the original
1\ \0
Definition of Supply
The number of goods businesses are willing to sell at a given price in a specific time period
Describe the direct relationship between supply and price
-As the price increases, the quantity supplied increases
-As the price decreases, the quantity supplied decreases
5 Non-Price Factors affecting Supply
-External Shocks
-Government Subsidies
-Indirect Taxes
-New Technology
-Changes in cost of production
In a SD Diagram, if supply increases how does the diagram change
The new supply line is to the right of the original
0/ 1/
In a SD Diagram, if supply decreases how does the diagram change
The new supply is to the left of the original
1/ 0/
Describe the relationship between demand/supply and prices
Demand rises - prices rise
Demand falls - prices fall
Supply rises - prices fall
Supply falls - prices rise
What is the hope to be achieved in a SD diagram
That sellers will gradually adjust their price until equilibrium is reached where sellers and buyers are satisfied
Formula of PED
%Change in Quantity Demanded
/
%Change in Price
