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Business A-level > 1.2 the market > Flashcards

1.2 the market Flashcards

1
Q

Price definition

A

What the buyer pays for a specific good or service

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2
Q

What is quantity demanded ?

A

The total amount of a good or service that consumers want over a given period of time.

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3
Q

What is the effect of income on a normal good ?

A

Increased income will lead to an increase in quantity demanded

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4
Q

What is the effect of income on quantity of an inferior good ?

A

Increased income may lead to a reduction in quantity demanded

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5
Q

What is the demand curve ?

A

A line showing the demand for a product at different prices

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6
Q

Equilibrium definition

A

The point where there is a balance between supply and demand

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7
Q

Name 4 factors that increase supply

A

-price rise
-increase in productivity
-fall in indirect tax
-developments in technology

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8
Q

What does a supply curve show ?

A

The relationship between price and quantity

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9
Q

Numerically what does price elastic demand look like ?

A

-1 and below

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10
Q

Numerically what does price inelastic demand look like ?

A

Between 0 and -1

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11
Q

What is the impact of price rise on a product with price elastic demand

A

Sales with decrease quickly therefore revenue decreases

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12
Q

What is the impact of price rise on a product with price inelastic demand ?

A

Sales fall slightly, but revenue rises

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13
Q

What is the impact of a price cut on a product with elastic demand ?

A

Sales rise sharply therefore revenue rises

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14
Q

What is the impact of a price cut on a product with price inelastic demand ?

A

Sales rise but not much, therefore revenue falls

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15
Q

Price elasticity formula

A

Price elasticity= % change in the quantity demanded /% change in price

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16
Q

What is price elasticity?

A

Price elasticity measures the extent to which demand for a product changes when it’s price changes

17
Q

What happens to demand when price increases ?

A

Demand decreases

18
Q

What happens to demand when price decreases

A

Demand increases

19
Q

What happens to the total revenue of a price elastic product, if the price increases ?

A

The total revenue decreases

20
Q

What happens to the total revenue of a price elastic product, if the price decreases ?

A

Total revenue increases

21
Q

What happens to the total revenue of a price inelastic product, if the price increases ?

A

The total revenue Increases

22
Q

What happens to the total revenue of a price inelastic product, if the price decreases ?

A

Total revenue decreases

23
Q

Factors leading to change in demand (5)

A

-price of substitutes
-consumer incomes
-advertising
-external shocks
-seasonality

24
Q

What are complimentary goods ?

A

Goods that are purchased together because they are consumed together

25
Q

Subsidies defintion

A

A grant which is given to producers, usually to encourage production of a certain good

26
Q

Substitute goods definition

A

Goods that can be bought as an alternative to others but perform the same function

27
Q

What is income elasticity of demand ?

A

Income elasticity of demand (YED) measures the responsiveness of quantity demanded to a change in consumer income.

28
Q

Income elasticity of demand (YED) formula

A

% change in quantity demanded/ % change in income

29
Q

For YED, if the calculated number is positive an increase in income will…………. demand

and if the calculated number is negative an increase in income will ………….. demand

A

Increase

Decrease

30
Q

What is a normal good ?

Example

A

A good that experiences increase in demand due to an increase in consumer income
E.g Milk

31
Q

What is an inferior good?
Example.

A

An inferior good is one whose demand drops when peoples income rises
E.g instant noodles

32
Q

What is a Luxury good ?

A

A luxury good is a good for which demand increase more than proportionally as income rises.

Business A-level (20 decks)

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