Ch 27- Demand and Supply Flashcards
Market demand
Refers to people’s willingness to buy a product or service at a particular place or time.
Demand curve
A graph showing the quantity of a product demanded by customers at different prices
What are movements in a demand curve caused by
Change in the price of a product
( causing quantity demand to change)
What are shifts in a demand curve caused by
All other factors ( not price change)
Advertising, disposable income, government regulations, natural causes, population changes
Factors affecting demand for a product?
Advertising and fashion trends
Disposable incomes and interest rates
Gvt taxes and regulations
Prices of substitute and complementary goods
Natural causes and population change
Market supply
Refers to quantity of a product that sellers are willing to make available to buyers at a given price and time
Supply curve
Graph showing quantity of a product sellers are willing to supply at different prices
Factors influencing supply of gods and services
Price
Cost of production
Natural causes - weather
Govt regulation, taxes, grants, subsidies
Price of supplying alternative poduct
How does price influence demand
When price increases demand falls and vice versa
How does price of substitute goods affect demand
If price of sub goods increases, demand for a product will increase as it has become relatively cheaper for customers.
Substitute goods
Can be swapped with each other for the sam euse
How does price of complementary goods affect demand
Sharp increase in milk could lead to fall in demand for both milk and cereal
Complementary goods
Products often purchased and used together
How does advertising affect demand
Boosts demand
Hiw does disposable income affect demand
Hiw much money people have to spend
Interest rates influence borrowing > houses and cards demand decreases in interest rates are low.
How does government regulation affect demand
Eg increase in VAT will increase prices and discourage demand ( tax on plastic bags)
E.g govt grants for households to be in energy efficient causes rise in demand for solar panels
How does natural causes affect demnad
Cold weather decreases demand for ice cream but increases for umbreallas
Population growth increases demand
How does price if a product affect supply
The Higher the price, the greater profit for sellers therfore they will supply more
How does cost of production affect supply
If cost of wages, raw materials, energy increase it becomes difficult to make a profit. > produce less supply
New technology can lower costs and increase supply
How does natural causes affect supply
Bad weather or diseases can interrupt supply eg agricultural goods.
How does government regulations and subsidies affect supply
Can increase business costs and discourage supple
Subsidies and grants can increase supply
Eg Eu subsidies to farmers to encourage supply of milk and meat.
How does price of altentaive goods affect supply
Sellers may switch to supplying othe goods if it is mote profitable
