2ND YEAR - Demand And Supply Flashcards
Market
A place where buyers and sellers interact and trade goods and services
Final Market
Actual locations where goods are bought and sold e.g farmers market, supermarket
Factor Market
Where factors of production are bought and sold e.g labour market and property market
Commodities Market
Where raw materials used in production are bought and sold e.g oil, gold
Global Market
e.g EBay
National Market
e.g Done Deal
Black Market
Where goods are sold illegally
Demand
Is the quantity of a product that consumers are willing to buy at a given price
Supply
Is the quantity of a product that producers are willing to sell at a given price
Law of Demand
- If the price of a product RISES the quantity demanded FALLS
- If the price of a product FALLS the demand RISES
Factors Affecting Demand
- Price
- Fashion
- Season
- Advertising
- Expectations of Buyers
- Income Levels
- Price of Substitute Goods
- Price of Complementary Goods
Factors Affecting Demand - Price
Price goes up, demand falls
Price goes down, demand rises
Factors Affecting Demand - Fashion
As consumer tastes change the demand for products will change e.g Furby were popular in 2001, but not anymore
Factors Affecting Demand - Season
Demand for some products change depending on the time of year e.g ice cream in the summer
Factors Affecting Demand - Advertising
Products heavily advertised may see an increase in demand
Factors Affecting Demand - Expectations of Buyers
If customers expect price to rise in future, demand more now.
Expect price to fall in future, demand less now
Factors Affecting Demand - Income Levels
If a person’s income increases they will demand more goods and services
Factors Affecting Demand - Price of Substitute Goods
Some goods have close substitutes.
e.g if price of Coca Cola goes up, some consumers will switch to cheaper alternative Pepsi
Factors Affecting Demand - Price of Complementary Goods
Some goods are used jointly e.g price of tennis balls rise, demand for tennis rackets falls
Law of Supply
- If the price of a product rises the quantity supplied rises
- If the price of a product falls the quantity supplied falls
Factors Affecting Supply
- Price
- Price of Related Goods
- Production Costs
- Technology
- Environment
Factors Affecting Supply - Price
When price goes up, goods are more profitable for producer. Supply will rise.
Price goes down, goods are less profitable. Supply will fall.
Factors Affecting Supply - Price of Related Goods
Price of Substitute and Complementary Goods may cause consumers to switch from/stop buying the product. Supply will be affected.
Factors Affecting Supply - Production Costs
Cost of making a product is low, more goods supplied
Factors Affecting Supply - Technology
Improvements in technology make it easier for goods to be made. Supply increases.
Factors Affecting Supply - Environment
Good/bad weather can affect crops. Bad weather might mean less, good weather might mean too much.
Demand Curve
A graph that illustrates the expected demand for a product at different price levels.
(We have a picture in our hardbacks)
Supply Curve
Graph that shows the quantity of a product that the seller will supply at different price levels
(Picture in hardback)
Market Equilibrium
See hardback
