1.2.3 - markets

Question 1

how do supply and demand interact?

Answer 1

• when demand is higher than supply, the price of the product will rise, until demand falls back to the level of supply
• if supply is higher than demand, prices will fall to stimulate more demand to ensure all stock is sold

Question 2

describe what a supply diagram should look like

Answer 2

• price on the y-axis
• quantity on the x-axis
• line with a positive gradient
• shifts right when increasing
• shifts left when decreasing

Question 3

describe what a demand diagram should look like

Answer 3

• price on the y-axis
• quantity on the x-axis
• line with a negative gradient
• shifts right when increasing
• shifts left when decreasing