Supply and Demand

Question 1

Demand

Answer 1

Demand is the quantity of a product that consumers are willing and able to purchase at any given price. It is assumed that this is effective demand.

Question 2

The law of Demand

Answer 2

The law of demand states that the higher the price, the lower the quantity demanded. Obviously, if the price is lower, then the quantity demanded will increase. This results in a downward sloping demand curve.

Question 3

Supply

Answer 3

Supply is the quantity of a product that suppliers (businesses) will offer to the market at a given price.

Question 4

The law on supply

Answer 4

As the price of a product increases, suppliers will attempt to maximise profits by increasing the quantity on offer for sale. Therefore, if the price that customers are willing to pay falls, then the quantity that businesses will supply will be lower. This results in an upward sloping supply curve.
At low price levels, only the most efficient suppliers can make a profit; thus, supply is limited. As price increases, the profit motive attracts new resources to supply and the higher price allows less efficient suppliers to make a profit. Therefore, as price increases, so does supply.

Question 5

Market Equilibrium

Answer 5

Market equilibrium is where the demand curve and the supply curve intersect. This means that, at a given price, the demand for a product equalled the supply.

Question 6

Factors that affect the demand curve

Answer 6

1.Price of substitutes
2.Alternative brands
3.Price of Compliments
4.changes in consumer income
5.Trends in Fashion and tastes
6.Marketing,advertising and branding
7.population stucture/demographics
8.Time of Year
9.Weather and climate

Question 7

Shift in the demand curve

Answer 7

movement of a demand curve right or left resulting from a change in factors of demand other than the price of the good

Question 8

Factors that affect the supply curve

Answer 8

1.price
2.cost of production
3.introduction of new technology
4.indirect taxes
5. Government subsides

Question 9

Cost of production- affects the supply curve

Answer 9

if the cost of production increase due to a rise in the cost of raw materials or due to a rise in minimum wage, the business may decide to produce less.

Question 10

Introduction to new technology

Answer 10

more goods can be supplied. Mass production methods improved to increase capacity