Supply and Demand

Question 1

what is demand

Answer 1

a consumers willingness to pay a certain price for a specific good/service

Question 2

what is supply

Answer 2

a producers willingness to supply products at a certain price

Question 3

what factors affect demand (5)

Answer 3

prices of subsitutes/compliments
changes in income
trends/fashion
advertising
population size

Question 4

what factors affect supply (5)

Answer 4

changes in production costs
taxes/subsidies
changes in prices of substitutes
changes in technology
change in number of producers

Question 5

what are the 3 elasticities and how they work

Answer 5

PED - Qd/P PED>1 elastic PED<1 inelastic
YED - Qd/Y YED<0 inferior YED> luxury 0<YED<1 normal
XED Qd of X/ P of Y XED<0 compliments XED>0 subsitutes

Question 6

what is PES and what factors affect it (3)

Answer 6

measures the responsiveness of supply to a change in price
spare production capacity, factor mobility
stocks of finished products