Demand and Supply

Question 1

What is demand?

Answer 1

The ammount of a product that consumers are willing and able to purchase at any given price.

Question 2

What is supply?

Answer 2

The ammount of a product which suppliers are willing to offer to the market at a given price.

Question 3

How will suppliers attempt too maximise their profits?

Answer 3

By increasing the quantity offered for sale as the price of an item goes up.

Question 4

What are movements along the supply curve cause by?

Answer 4

Changes in price.

Question 5

What is the law of demand?

Answer 5

As price goes up demand falls and as price falls demand goes up.

Question 6

What is market equilibrium?

Answer 6

Where the demand curve and supply curve intersect.

Question 7

What can businesses determine from the market equilibirum?

Answer 7

Market price, market quantity.

Question 8

Is market equilibrium fixed or non fixed?

Answer 8

Non fixed.

Question 9

What does an outward shift in the demand curve mean?

Answer 9

More product demanded.

Question 10

What des an inward shift in the demand curve mean?

Answer 10

Less product demanded.

Question 11

What factors affect demand?

Answer 11

Increase in consumer income, changes in case and fashion, change in price of other goods, advertising or bad publicity, population changes, government legislation.

Question 12

What creates a new equilibrium?

Answer 12

When the demand curve shifts.

Question 13

What factors effect supply?

Answer 13

Change in costs, weather changes, new technology, legislation.

Question 14

What is YED (income elasticity of demand)?

Answer 14

The responsiveness of demand to changes in income. It can be Elastic, Inelastic or Negative.

Question 15

What is PED (price elasticity of demand)?

Answer 15

The responsiveness of demand to a change in price.

Question 16

What does PED show us?

Answer 16

The sensitivity of demand for good/service to change in price.

Question 17

Where is price likely to be elastic?

Answer 17

In markets with perfect competition.

Question 18

What does it mean if price is highly elastic?

Answer 18

When price changes demand changes dramatically.

Question 19

What does it mean if price is highly inelastic?

Answer 19

When price changes there is barley any change to demand.

Question 20

If price is inelastic what does it mean the competition is like?

Answer 20

Low level of competition.

Question 21

Why is it important to know wether price is inelastic or elastic?

Answer 21

It is important for decision making especially when marketing.

Question 22

How can a business make their price inelastic?

Answer 22

Encourage consumer loyalty, reduce competition, increase brand value.

Question 23

When are people likely to buy normal and luxary goods?

Answer 23

When income increases.

Question 24

What are examples of normal goods?

Answer 24

Cars, furniture, washing machines.

Question 25

When will people buy inferior goods?

Answer 25

When income decreases, (recessions). When there is a negative income elasticity of demand.