1.2.3 Markets Flashcards
Def of commodity markets
Markets for undifferentiated products, generally raw materials such as gold, crude oil and rice
In commodity markets, what is price determines by?
The interaction of supply and demand
What happens in demand is higher than supply
The price of the product will rise until demand falls back to level of supply
What happens if supply is higher than demand
The price will fall, stimulating more demand to ensure all supplied is sold
Def of equilibrium
Describes a situation in a market where supply and demand are balanced, making the price stable
What do supply and demand diagrams show
How much of a product would be demanded at a range of different price levels
What does a supply curve show
How much of a product businesses are willing to supply at a range of price levels
2 main causes and consequences of price change
Changes in demand
Changes in supply
Examples of changes in demand
- changes in price of substitutes and complementary goods
- changes in customer incomes
- advertising and branding
- demographics
- external shocks
- seasonality
Examples of changes in supply
- changes in cost of production
- introduction of new technology
- indirect taxes
- government subsidies
- external shocks
As the demand curve moves to the right, the price will move
Up
As the demand curve moves to the left, the price will
Move down
As the supply curve moves to the left, the price will move
Up
As the supply curve moves to the right, the price will move
Down
