Component 1 Booklet 4 Flashcards
What is demand?
Demand is the amount of product that consumers are willing and able to purchase at any given price
What is effective demand?
Demand that is backed up by money and an ability to buy
How do you read a demand curve?
It slopes downwards from left to right
-the higher the price the lower the quantity demanded.The lower the price the higher the quantity demanded.
What are factors that impact demand?
- change in income
- change in tastes and fashions
- change in the price of other goods
- successful advertising campaign
- changes in population
- government/legislation
What is supply?
Supply is the amount of products which suppliers will offer to the market at a given price.
What is the Market equilibrium?
Where the demand and supply curves intersect
What can we identify from the market equilibrium?
The market price and market quantity
How do you explain a curve shift in your exam?
Say
•why is the shift occurring?
- how it is shown(e.g:shift to the right)
- explain where the new market equilibrium is shown
- explain what is happening to the price and the quantity demanded
What is meant by price elastic?
Where a change in price will cause a more than proportional change in the quantity demanded
What is meant my price inelastic?
Where a change in price will cause a less than proportional change in the quantity demanded.
How can a business make demand for their product more inelastic?
- increase customer loyalty
- increase brand value
- reduce or restrict competition in the market
What is meant by income elasticity of demand being elastic?
Change in income will cause a more than proportional change in quantity demanded
Example-a 5% increase leads to a 10% increase in demand
What is meant by income elasticity of demand being inelastic?
Change in income causes a less than proportional change in quantity demanded
Example-income falls by 4% but demand falls by 2%
