1.2 - the market

Question 1

What is demand

Answer 1

Quantity willing or able to be purchased

Question 2

Show demand on a diagram

Answer 2

Question 3

Non-price factors affecting demand

Answer 3

• Price of substitutes and complementary goods
• RDI levels
• Trends

Question 4

What is supply

Answer 4

Quantity willing or able to be supplied

Question 5

Factors affecting supply

Answer 5

• Changes to cost of production
• ## Technology

Question 6

What is PED?

Answer 6

If price changes, how much does demand change?

Question 7

What are PED figures always?

Answer 7

A negative

Question 8

What is the formula for PED?

Answer 8

PED = %Change in QD / % change in price

Question 9

How to know a PED is elastic or inelastic?

Answer 9

Elastic = more than 1 (normal or luxury goods
Inelastic = less than 1 (inferior)

Question 10

What is income elasticity of demand?

Answer 10

If income changes, how much does demand change?

Question 11

What is the formula for Income elasticity of demand?

Answer 11

YED = %change in QD / %change in Y(income)

Question 12

For YED, how to know which good is normal, inferior or luxury?

Answer 12

Luxury good = Products with a highly positive YED

Normal good = Products with a slightly positive YED

Inferior good = products with a negative YED.