Question 1

What is Demand?

Accepted Answer

demand is the amount of a product that consumers are willing and able to purchase at any given price

Question 2

What factors lead to a change in demand?

Accepted Answer

- Change in the price of substitutes e.g. pepsi and coke - Price of compliments --> cornflakes and milk - Change in consumer incomes --> Normal goods vs inferior goods - Fashions, taste, and preferences--> snoods, increase in demand for bike due to triathlons. - advertising and branding - Demographics - External Shock --> competition, government - taxes and laws, Economic climate - Seasonality -->the seasons have an impact on what we buy as does calendar events

Question 3

How do different demographics affect demand?

Accepted Answer

- Age--> distributions - centennials - Gender --> Slightly more women than men - Geographical --> more urbanisation, greater demand or school, hospital - Other group --> single parent families, ethnic groups more demand for products associated with their culture immigration - polish products

Question 4

What is Supply?

Accepted Answer

the amount of a product which suppliers will offer to the market at a given price - the higher the price, the more will be offered in the market

Question 5

What is fixed supply?

Accepted Answer

this is when there is a limit to supply, so price is irrelevant e.g. the number of swats in a cinema, tickets at the Wolves Civic

Question 6

What factors lead to a change in supply?

Accepted Answer

- changes in the cost of production - raw materials, energy wages, rent machinery - the availability of resources --> a lack of resources can reduce supply - Introduction of new technology - Indirect taxes --> e.g. VAT and excise taxes - Government subsidies --> grants to reduce costs, farming and renewable power sources - external shocks - Bank of England --> interest rates

Question 7

How do External shock affect supply?

Accepted Answer

- World events --> wars, financial crisis - Weather --> impact on agriculture but also distributing good - Government --> Bank of England increasing interest rates, increases costs of loan repayments, legislation can make markets less competitive - Price of relate goods -->if similar goods are going up in price businesses might change to supply more of that product and reduce supply of its current product e.g. carrot and potatoes

Question 8

How does the Bank of England affect supply?

Accepted Answer

- High interest rates --> good for savers, bad for loan repayments - Low interest rates --> Bad for savers, good for loan repayers - Low interest rates --> to increase consumer spending

Question 9

What is Excess demand?

Accepted Answer

the position where demand is greater than supply and there are shortages inthe market

Question 10

What is Excess Supply?

Accepted Answer

the position where supply is greater than demand and there are unsold gods in the market

Question 11

What happens to price when demand falls?

Accepted Answer

- the business have to lower the price - if they dont lower it they coud be too much insold stock

Question 12

What happens to price when supply goes up?

Accepted Answer

- prices go down as they is too much supply

Question 13

What is equilibrium?

Accepted Answer

also known as market clearing price where the amount supplied is completely brought by consumers

Question 14

What is disequilibrium?

Accepted Answer

where the price in the market is not set at the point where supply and demand are equal

Question 15

What is PED?

Accepted Answer

- Price Elasticity of Demand - How responsive a products demand i to a change in the price - understanding PED helps you set the right pricing

Brainscape's Knowledge GenomeTM

1.2 The Market Flashcards

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