Revision Flashcards
What is demand?
The quantity that customers are willing and able to buy at a given price in a given period of time
What is the basic law of demand?
The basic law of demand is that when the price increases, demand increases
What are the 6 main causes of change in market demand?
- Price
- Incomes
- Tastes and preferences
- Advertising and branding
- External shocks
- Season factors
What is supply?
Supply is the quantity of a good or service that a producer is willing to supply onto the market at a given time period
*. Supply to on graph
What is the basic law of supply?
The basic law of supply is that as the selling price of a product rises, so business expand to supply to the market
- The higher selling price acts as a incentive for businesses to produce more
What are the 4 main causes of changes in supply?
- Costs of production
- External shocks
- New technology
- Taxation and subsidies
How does technology affect supply?
Technological change encourages new entrants to the market (increasing supply), can also enable existing suppliers to be more efficient, therefore increasing their potential to supply
What is market equilibrium?
Market equilibrium is when there is a balance between demand and supply in a market
What is price elasticity of demand (PED) ?
PED is the responsiveness of the demand to a change in price
How do you calculate PED?
PED= % change in Q demanded
% change in price
Is a value of L1 elastic/inelastic?
Less than 1= inelastic
Is a value > 1 elastic/inelastic?
More than 1= price elastic
What are 5 factors that affect PED?
- Brand strength
- Necessity/luxury
- Habit
- Availability of substitutes
- Time
What is income elasticity of demand (YED) ?
YED= the extent to which the quantity of a product demanded is affected by a change in income
How do you calculate YED?
YED= % change in Q demanded
% change in income
