LS8 and LS9 - Demand and Supply

Question 1

Demand

Answer 1

Demand is the quantity of goods purchased at a given price over a certain time period

Question 2

Movements on a demand curve are caused by…
What is an extension and contraction

Answer 2

These are caused by changes within price level.
An increase in price level would cause an extension.
A decrease in price level would result in a contraction.

Question 3

Substitute Goods

Answer 3

Two alternative products that can be used for the same purpose

Question 4

Complimentary Goods

Answer 4

These are goods which are used together

Question 5

Shifts in Demand

Answer 5

Shifts in demand are caused by changes in PASIFIC
Population - When population increases, demand increases

Advertising - Successful advertising would result in an increase in demand

Substitute goods - An increase in the price of iPhone’s would result in a decrease in demand and then an increase in demand of Samsung phones, a substitute good

Income - A rise in real income would increase demand as people are more able to afford products

Fashion/Preferences - A new fashion would result in an increase in demand of those goods in particular

Interest rates - As interest rates rise, borrowing becomes more expensive and so there are falls in demand of houses, cars and other expensive goods.

Consumer Tastes - Changes in consumer tastes means that the demand for a good that is no longer in taste has a fall in demand. A good that is now in taste/fashion has an increase in demand

Question 6

Supply

Answer 6

The ability and willingness to provide a good or service at a given price at a given time

Question 7

Movements on the Supply Curve

Answer 7

These are as a result of supply levels.
As there is an increase in supply, there is an extension on the graph
As there is a decrease in supply, there is a contraction on the graph

Question 8

Diminishing law of marginal utility

Answer 8

The satisfaction derived from the consumption of an additional unit of a good will decrease as more of a good is consumed

Question 9

Shifts in Supply

Answer 9

Shifts in supply are caused by changes in the costs of production. The factors that cause shifts in supply are PINTSWC

Productivity

Indirect tax is a tax on goods and services which are costs that the firm would have to cover. This means the costs of production increases

Number of firms. The higher the number of firms in the market, the higher the supply

Technological advancements would mean that the supply shifts right

Subsidies lower the costs of production meaning that supply would shift to the right

Weather may affect the crops and therefore the supply of a good

Costs of production. Transport, Labour, Oil, Raw material