CHAPTER 3 - Demand and Supply Flashcards
what is demand
the amount of a product that consumers are willing and able to purchase at any given price.
law of demand
higher the price, the lower the quantity demanded
lower the price, the higher the quantity demanded
equilibrium
Where the demand curve and the supply curve intersect
quantity that consumers are willing to purchase matches the quantity that suppliers are willing to supply at a given price
Shifts in demand and supply
rise - right
less - left
Factors that affect demand
STIGCAP Substitute goods Tastes and fashion Income Gov legislation Complimentary goods Anticipation of shortage/advertisement Population
Factors that affect supply
CCCIG Competition Climate Cost of production Intro of new technology Gov influences
What is price elasticity of demand?
measures how demand reacts to changes of price
price elastic/price sensitive
price up - demand falls dramatically
price down - demand increases dramatically
wants - soft drinks, newspapers
price inelastic/price insensitive
price up - demand falls just a little.
price down - increases just a little
needs - gas, electricity, petrol
what is income elasticity of demand?
measures how demand responds to a change in income
normal goods
income up - demand up
cars, furniture, washing machines etc.
inferior goods
income down - demand up
business’s own brand e.g tesco value, asda basics
luxury goods
income up - demand up
designer clothes, sports car
