Chapter 13- Demand And Supply Flashcards
A market:
Is a place where buyers and sellers interact and trade goods and services.
Final Markets:
Actual locations where good (and services) are bought and sold, e.g. supermarkets.
Factor Markets:
Where factors of production are bought and sold, e.g. labour market.
Commodities Markets:
Where raw materials used in production are bought and sold e.g. oil.
Global Market example:
eBay
National Markets example:
Done Deal
Black Markets:
Where goods are sold illegally
What is demand?
The quantity of a product that consumers are willing to buy at a given price
What is the rule for demand and low and high prices?
Low price = increased demand
High price = decreased demand
Example of demand increase and decrease:
A laptop normally costs €500
If the price of the laptop is €350, demand will increase
If the price of the laptop is €700, demand will decrease
What do consumers always want?
The LOWEST POSSIBLE PRICE
What is supply?
Supply is the quantity of a product that producers are willing to sell at a given price
What is the rule for supply when prices are high/low?
Low prices = decreased supply
High prices = increased supply
Example of price affecting supply:
If the price of a laptop goes down, supply will decrease
If the price of a laptop goes up, supply will increase
FACTORS AFFECTING DEMAND (8)
Price Fashion Season Advertising Expectations of buyers Income levels Price of substitue goods Price of complimentary goods
FACTORS AFFECTING DEMAND
Price
When the price of a good goes up, it is more expensive and so demand will fall
When the price for a good goes down, it is cheaper and so the demand will rise
FACTORS AFFECTING DEMAND
Fashion
As consumer tastes change, demand for products 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 that are heavily advertised may see an increase in demand e.g. Specsavers “What sort of cheese was that?”
FACTORS AFFECTING DEMAND
Expectations of buyers
If customers expect prices to rise in the future, they may demand more now
Similarly, of customers expect prices to fall in the future, they may demand less now
FACTORS AFFECTING DEMAND
Income levels
If a person’s income rises, they will demand more goods and services
FACTORS AFFECTING DEMAND
Prices of substitute goods
Some goods have close substitutes. This means they can be used as alternatives to each other.
E.g. Coca Cola and Pepsi. When the price of Coca Cola goes up, some consumers may switch to the cheaper alternative of Pepsi
FACTORS AFFECTING DEMAND
Price of complementary goods
Some goods are used jointly, e.g. tennis rackets and tennis balls. If the price of a tennis racket goes up, the demand for tennis balls will fall
FACTORS AFFECTING SUPPLY (5)
Price Price of related goods Production costs Technology Environment
FACTORS AFFECTING SUPPLY
Price
When the price of a good goes up, goods are more profitable for the producer so the supply will rise
When the price of a good goes down, goods are less profitable for the producer so they will supply less
FACTORS AFFECTING SUPPLY
Price of related goods
The price of substitue and complimentary goods may cause the consumers to switch to/ stop buying our product which will affect the available supply of our product
FACTORS AFFECTING SUPPLY
Production costs
When the cost of making a product is low, more goods will be supplied as it is cheaper
FACTORS AFFECTING SUPPLY
Technology
Improvements in technology and machinery make it easier for goods to be made which increases supply
FACTORS AFFECTING SUPPLY
Environment
Good/ bad weather can affect a crop
Bad weather might mean there is less supply of wheat
Good weather might mean there is too much supply of wheat
What is a demand curve?
A graph that illustrates the expected demand for a product at different price levels
What is a supply curve?
A graph that illustrates the quantity of a product that a producer will supply at different price levels
What demand is greater than supply what happens?
A shortage occurs which mean the price increases
E.g. Tickets for All-Irelands sold out (demand > supply) tickets very expensive outside stadium
When supply is greater than demand what happens?
A surplus occurs meaning the price decreases
E.g. Concert ticket not popular, tickets not sold out. Excess supply/ surplus, causes price decrease as people not willing to pay high price
What is a market equilibrium
Is the position reached when, in the marketplace, supply and demand interact until a balance (equilibrium position) is reached
When does a market equilibrium occur?
When supply is equal to demand (this is not very common)
Sellers willing to supply at this price,
Buyers willing to buy at this price
