Chapter 14- demand and supply and market forces

Question 1

Demand

Answer 1

The quantity that people in a particular market can and will purchase at each price
- if market price is low, more people will purchase product
- demand curve looks at the behaviour of consumers when price changes

Question 2

Supply

Answer 2

Quantities that are offered for sale by businesses at each price
- supply curve looks at price from the point of view of the business
- if market price rises, businesses will try to supply more and they can make more profit

Question 3

Equilibrium price

Answer 3

• price at which the consumers demand coincides with what businesses are prepared to supply
• in this situation consumers are able to buy everything that they want to buy; they are satisfied with the situation

Question 4

Equilibrium

Answer 4

The situation in a market when demand is equal to supply

Question 5

Excess demand

Answer 5

More demand than supply

Question 6

Factors determining demand

Answer 6

1. Price
   - this higher the price the lower the quantity demanded
2. Income
   - an increase in income leads to an increase in demand
   - there are some goods whose demand goes down when income rises (goods are known as inferior goods), value, budget, discount
3. Wealth
   - the combined value of savings, shares owned
4. Advertising, promotional offers and public relations
   - successful promotional campaign shifts the demand curve to the right
5. Taste and fashion
6. Demographic changes
   These include
   - shift in age structure of population
   - change in gender ratio
7. Government action
   - campaigns by government could alter patterns of consumption
8. Price of other goods
   Substitute: