Market Supply And Demand

Question 1

what is the definition of effective demand?

Answer 1

quantity of people able to purchase and are willing to buy the product

Question 2

what is the relationship of the demand curve graph

Answer 2

inverse relationship

Question 3

what is on the y axis on the demand graph

Answer 3

price

Question 4

what is on the x axis on the demand graph

Answer 4

quantity

Question 5

in order to go up and down on the demand curve what changes

Answer 5

price

Question 6

in order to move position of the demand curve what changes

Answer 6

remember PASIFIC
population
advertisement
substitutes
income
fashion trends
interest rates
complimenting products

Question 7

what is the income effect?

Answer 7

-allows people to purchase more as more disposable income
-fall in prices, increase in real purchases
-normal goods demand rises in real income

Question 8

what is the substitution effect?

Answer 8

-a fall in good ‘x’ makes it relatively cheaper than substitute
-some will change to good ‘x’ resulting in higher demand
-depends on if products are close to the substitutes

Question 9

what happens if a substitute for strawberries increased in price

Answer 9

The demand for strawberries would increase as there would be no need to purchase the substitute ( raspberries ) as the better quality original product,strawberries, is now better value for money. Therefore an outward shift in the demand curve

Question 10

what would happen if a complimenting product like cream for strawberries price increased

Answer 10

demand for strawberries would decrease as they would often only be purchased with cream and is now expensive and consumers are unable and not willing to purchase it anymore. Demand shift inward

Question 11

what would happen if strawberries prices decreased

Answer 11

the demand for strawberries would increase as more consumers would be willing and able to purchase the strawberries. Due to price, there will be a shift down the curve as it’s a lower price

Question 12

what causes the supply curve to move up and down

Answer 12

The selling price

Question 13

What causes the supply curve to move as an outward shift

Answer 13

fall in cost of production, produce more for the same cost, more suppliers enter the market, subsides

Question 14

What causes the supply curve to move as an inward shift

Answer 14

rise in cost of production, indirect taxes applied, tax added by government

Question 15

what causes supply curve to shift

Answer 15

remember PINTSWC
productivity
indirect taxes
number of firms
subsides
weather
cost of production