2- Demand and Supply Flashcards
What is demand?
Th willingness and ability to buy a product
What is the relationship between the price and quantity demanded?
The higher the price lower quantity demanded lower the demanded.
The lower the price the high quantity demanded
Inverse relationship between price and quantity.
What is an extension in demand?
The fall in the price of a good is likely to lend the rise in the demand for a good.
What is a contraction in demand?
The rise in the price of a good is likely to lead the fall in the demand for the good.
What are the conditions of demand?
Population size: The number of people in the country influenced by the birth and death rate.
Advertising campaigns : the success of a company’s marketing influence
Substitute good : The price of competitor goods will have a knock on effect on the demand for certain goods
Income : Changing in consumers purchasing power
Fashion and taste : Consumers preferences fluctuate and can be influenced over a period of time
Complementary good : the prices of related products
What is supply?
Supply is the amount of a good/service that a producer is willing & able to supply at a given price in a given time period
What is the relationship between the price and quantity supplied
As price rises the quantity supplied rises as the price falls the quantity supplied falls. Deduced as a positive relationship.
What is an extension in supply?
A rise in the price that is likely to lead to an increase in the quality of supply.
What are the conditions of supply?
Cost of production : The price of raw materials used in the production process
Productivity : output per unit of input
Improvement in tech : Changes in the productivity of capital
Taxes : A cost a firm has to pay
Subsidies : Money given to producers to incentivise production
Weather : Conditions which affect production particulary livestock and agriculture
War: The knock on effects on the production processes and abilities
