Demand and supply Flashcards
What is meant by demand?
the quantity of a product that consumers are able and willing to purchase at various prices over a period of time
what is the link between demand and price?
The lower the price, the more customers want to buy. Therefore as price falls , more is demanded and vice versa
What is meant by supply?
the quantity of a product that producers are willing and able to provide at different market prices over a period of time
What is the link between price and supply?
The higher the price , the more suppliers will want to supply as the more profit they are likely to make
What is meant by market equilibrium price?
The point at which supply meets demand is the MARKET EQUILIBRIUM PRICE , at this price all that is supplied to the market will be bought
What are some factors that lead to a change in the quantity demanded?
. incomes
. changes in tastes and fashions
. changes in price of other goods
. changes in population
what are substitute goods?
these goods are substitutes for each other , a fall in the price of one could lead to a decreased demand in the other and vice versa
What are complimentary goods?
these goods are compliments, they are bought jointly,
if the price of one fell, the demand for the other could increase and vice versa e.g. printer and ink
what are some factors that could lead to a change in the quantity supplied?
. changes in a business’s costs
. weather
. introduction of new technology
. legislation
what is meant by price elastic?
when a price change leads to a MORE than proportional change is demand
what is meant by price inelastic?
when a price change leads to a LESS than proportional change in demand
what is the calculation for price elasticity of demand?
percentage change in quantity demanded
__________________________________
percentage change in price
what numbers will show after the PED or YED calculation that the price/ income is inelastic?
0-1
what numbers will show after the PED or YED calculation that the price/income is elastic?
1 or above
what does income elasticity of demand measure?
how sensitive is demand to a change in consumers’ income
what is the calculation for income elasticity of demand?
percentage change in quantity demanded
__________________________________
percentage change in income
what is meant by income elastic?
when a change in consumers’ income results in a MORE than proportional change in demand
what is meant by income inelastic?
when a change in consumers’ income results in a LESS than proportional change in demand
what are inferior goods?
these are goods which people tend to buy less of as they have more income, s their incomes increase their demand for these goods and services falls and vice versa
what are normal goods?
these are goods where people earn more money they will buy more of these goods , if they earn less money, they will reduce their demand for these goods
what are luxury goods?
these are normal goods except the change in demand will be bigger when incomes change,
