Demand & Supply.

Question 1

What is Demand.

Answer 1

Demand is the quantity that customers are willing/able to pay at a given time/price.

Question 2

Law Of Demand.

Answer 2

Ceteris Paribus; an inverse relationship between quantity demand and price of good.

Extension in demand = Contraction in price.
Contraction in Demand= Contraction in Price.

Question 3

Factors that lead to Movement & Shift in Demand.

Answer 3

PAPPITSDE
MOVEMENT:
P-price of good/service.
SHIFT:
A-advertising/branding.
P-price of complementary goods.
P-price of substitute goods.
I-income of customer.
T-trends.
S-seasonality.
D-demographics
E-external shocks

Question 4

Rules when constructing a Demand Diagram.

Answer 4

• Demand curve shifts left = Contraction.
• Demand curve shift to right = Extension.
• Any of other factor than price (movement)= demand curve will shift.
• Price is always on the y axis, Quantity (Demanded) on X axis & 0 on starting point.
• Demand curve sloping downwards, doesn’t start from 0.

Question 5

What is Supply:

Answer 5

Supply is the quantity of a good/service that the producers are able to offer to the market at a given time/price.

Question 6

Law of Supply.

Answer 6

Direct relationship between quantity supplied and price of the good.

Contraction in supply = contraction in price.
Extension in price= extension in supply.

Question 7

Factors shifting Supply (FETTPP).

Answer 7

SHIFT.
F-future expectations.
E-external shocks.
T-technology.
T-taxes&subsidies (grants from government).
P-production costs.
P-price of other goods.

MOVEMENT- price of good.

Question 8

Rules when constructing Supply Diagram.

Answer 8

• Price on y axis, Quantity (supplied0 on x axis.
• The Supply Curve will be going upwards from starting point.
• One supply curve = MOVEMENT.
• Multiple supply curves = SHIFT.