External Influences-demand, supply,elasticity Flashcards
Define demand
The amount of a good/service that customers are willing and able to buy at any given price
What happens to demand when the price of a good/service is too high?
Demand decreases
What happens to demand when the price of a good/service is low?
Demand increases
Define supply
The amount of a good/service that sellers are willing and able to sell at any given price
What happens to supply when the price of a good/service is high?
Why?
Supply increases
As it’s more profitable
What happens to supply when the price of a good/service is low?
Why?
Supply decreases
As it’s less profitable
Which direction does a demand curve go?
Downwards
Which direction does a supply curve go?
Upwards
Define the equilibrium price
The situation in a market where demand is equal to supply
What happens to the demand or supply curve if price is mentioned?
You move along the curve not shift it
What way does the curve shift if there is a positive change?
To the right
What way does the curve shift if there is a negative change?
To the left
What does an increase in demand mean for quantity demanded?
An increase in demand means an increase in quantity demanded at every given price
What are the determinants of demand?
Wealth Taste/fashion Government action Advertising/promotional offers Demographic changes Price of other products-substitutes, complements
What are the determinants of supply?
Price Costs Taxes Subsidies Price of other products
Define price
The amount the customers are willing and able to pay
What happens to supply when price increases?
Supply increases
What happens to supply when price decreases?
Supply decreases
Define costs
The amount spent by a business making/supplying/buying in the product
What happens to supply if costs decrease?
Supply increases
What happens to supply if costs increase?
Supply decreases
What would happen to supply if taxes are raised?
Why?
What happens to the supply curve?
Business would supply less
As they wouldn’t have as much money to spend on products
Supply curve would shift to the left
Define a subsidy
A payment from the gov. for every unit supplied
What would happen to supply if subsidies are raised?
Why?
What happens to the supply curve?
Business would supply more
As they’d have extra money to use
Supply curve would shift to the right
