1.2 The market Flashcards
1
Q
Factors that change demand
(PASIFIC)
A
Population
Advertising
Substitutes
Income
Fashion/trends
Interest rates
Complimentary goods
2
Q
factors that effect supply
A
- Costs of production (raw materials, wages)
- external shocks
- introduction of new technology
- indirect taxes
- Government subsidies
3
Q
what is the PED of a product if it is highly price elastic
A
> 1
4
Q
what is the PED of a product if it is highly inelastic
A
0
5
Q
factors influencing price elasticity
A
- number of substitutes/competitors
- extent to which product is a necessity (e.g. petrol or Pepsi)
- Time
6
Q
what happens to inferior goods if Income rises
A
Demand for inferior decreases
7
Q
what happens to normal/luxury goods if income rises
A
demand increases
8
Q
factors influencing YED
A
- whether product is considered necessity/luxury
