1.2 the market S

Question 1

define demand

Answer 1

the amount of a good or service that people are willing and able to buy at a given price at a given time

Question 2

what 7 factors can influence demand?

changes in p…
changes in c…
f… and p…
a… and b…
d…
e…
s…

Answer 2

1. changes in the price of other goods and services - substitues/complements
2. changes in consumer incomes - normal vs luxury/inferior goods
3. fashion taste and preferences
4. advertising and branding
5. demographics
6. external shocks
7. seasonality

if any of these change, it will cause a shift in demand curve

Question 3

define supply

Answer 3

the quantity of a good and services that sellers offer for sale at a given price

Question 4

what 6 factors can influence supply?

Answer 4

1. price
2. changes in the cost of production
3. new technology
4. indirect taxes
5. government subsidies
6. external shocks

Question 5

define market equilibrium and equilibrium price

Answer 5

ME - the point at which the supply and demand curves cross

EP - the price at which supply and demand are equal in a market, leaving neither excess demand or supply

Question 6

what is the formula for PED?

Answer 6

% change in Qd / % change in Price

Question 7

what are the 5 factors affecting PED?

Answer 7

1. availability of substitutes
2. brand loyalty
3. ability to switch
4. luxury or necessity
5. proportion of income spent on goods

Question 8

define YED

Answer 8

measures the realtionship between changes in Qd and a change in real income

Question 9

what is the formula for YED?

Answer 9

% change in Qd / % change in income

Question 10

what are 3 factors that can influence YED?

Answer 10

1. luxury/necessity
2. consumer habits - may be slow to change
3. loss of confidence - incomes falling = cut back on luxuries