Supply and Demand

Question 1

What are economic substitutes?

Answer 1

An economic substitute is a good where the consumer can easily switch to an alternative e.g. a substitute for Pepsi is Coca-Cola

Question 2

What are economic complements?

Answer 2

An economic complement is a good that is often consumed alongside another good e.g. Xbox controllers are a complement to Xbox consoles.

Question 3

Identify what causes a movement along the demand curve.

Answer 3

A change in price of the product in question.

Question 4

Identify what causes a movement along the supply curve.

Answer 4

A change in price of the product in question,

Question 5

Identify factors that will cause a shift in demand.

Answer 5

Change in taste / fashion Change in income Change in population Change in price of a complement Change in price of a substitute

Question 6

Identify factors that will cause a shift in supply.

Answer 6

Change in costs (labour, raw materials) for producers Change in taxes for producers Change in subsidies for producers Change in weather (for agricultural products) Natural disaster

Question 7

There is a rise in the price of the London congestion charge fro. £8 to £15. Use a diagram to show how this affects the demand for London Underground tickets.

Answer 7

See picture.

Question 8

Due to a major oil spill in Nigeria, resulting in the loss of 5 million barrels of oil, what is the likely effect on the price of oil and why?

Answer 8

See picture.