Supply and Demand Flashcards
What is a market?
A market is a place where buyers and sellers interact and trade goods and services.
What is a final market?
Actual locations where goods are bought and sold e.g. farmer’s market, supermarket.
What is a factors market?
Where factors of production are bought and sold e.g. labour market and property market.
What is a commodities market?
Where raw materials used in production are bought and sold e.g. oil, gold.
What is a global market?
A national market. E.g. Ebay National markets e.g. Done Deal.
What is a black market?
Where goods are sold illegally. E.g. the dark web.
What is demand? What is the principle of demand?
Demand is the quantity of a product that consumers are willing to buy at a given price.
The principle of demand states that consumers always want the LOWEST POSSIBLE PRICE.
If the PRICE of a product FALLS, the DEMAND for a product INCREASES. If the PRICE of a product RISES, the DEMAND for a product DECREASES.
What is supply? What is the principle of supply?
Supply is the quantity of a product that PRODUCERS are willing to SELL at a given price. Producers always want the HIGHEST POSSIBLE PRICE.
When PRICES are high, the SUPPLY of a product INCREASES.
When PRICES are low the SUPPLY of a product DECREASES.
Give an example of price affecting Demand?
A laptop costs €500
If the price of the laptop FALLS to €350, demand will INCREASE.
If the price of a laptop rises to €700 demand will DECREASE.
Give three real life relationships between price and demand?
Housing Crisis-Increased demand in Ireland caused prices to rise.
Sold Out Concert-Increased demand for a popular concert causes the price of tickets to rise.
Holidays-Hotel and Flight prices rise during school holidays as demand is higher at this time.
What 8 factors effect demand?
k-Price
- Fashion
- Season
- Advertising
- Expectation of Buyers
- Income levels
- Prices of Substitute Goods
- Prices of Complimentary Goods
Why price is a factor that effects Demand?
Price effects demand because when the price of a good goes up, goods are more expensive and the demand will fall. When the price of a good goes down, goods are cheaper and the demand will rise.
Why Fashion is a factor that effects Demand?
Fashion effects demand because as consumer tastes change, demand for products will change.
Why Season is a factor that effects Demand?
Season effects demand because demand for some products change depending on the time of year e.g. ice-cream.
Why advertising is a factor that effects Demand?
Advertising effects demand because products that are heavily advertised may see an increase in demand.
Why the expectation of buyers is a factor that effects Demand?
The expectation of buyers effects demand because if customers expect prices to rise in the future, they may demand more now. Similarly, if customers expect prices to fall in the future, they may demand less now.
Why income levels is a factor that effects Demand?
Income levels effects demand because if a person’s income rises, they will demand more goods and services.
Why the price of substitute goods is a factor that effects Demand?
The price of substitute goods effects demand because some goods have close substitutes. This means they can be used as alternatives to each other. E.g. Coca Cola and Pepsi. When the price of Coca Cola goes up, some consumers may switch to the cheaper alternative Pepsi.
Why the price of complimentary goods is a factor that effects Demand?
The price of complimentary goods effects demand because some goods are used jointly. E.g. Tennis racket and Tennis balls. If the price of a tennis racket goes up, the demand for tennis balls will fall.
Give an example of the relationship between Price and Supply?
A Cappucino Coffee costs €3
If the PRICE of the Cappuccino RISES to €5, Starbucks supply will RISE, as it is profitable for them.
If the PRICE of the Cappuccino FALLS to €1.50, Starbucks supply will FALL, as it is no longer as profitable for them
Give an example in real life of the relationship between price and supply?
Strawberries: good weather may result in a good crop of strawberries. This might lead to an excess supply that the farmer might have to sell cheaper to get rid of them.
Labour: If a large number of people are unemployed in Dublin, there is excess supply, this means that workers will be willing to accept lower wages.
Wheat: Bad weather may result in a poor crop of wheat. Farmers may charge a higher price as there is a shortage of wheat.
Name the five factors that affect supply.
- Price
- Price of Related Goods
- Production Costs
- Technology
- Environment
Why price is a factor that affects supply?
Price is a factor that affects supply because when the PRICE of a good GOES UP, goods are more profitable for the producer so the supply will RISE. When the PRICE of a good GOES DOWN, goods are less profitable for the producer so they will supply LESS.
Why the price of related goods is a factor that affects supply?
The price of related goods is a factor that affects supply because the price of a substitute of complimentary good may cause the consumer to switch to/stop buying a particular product which will affect the supply be provided by the firm.
Why production cost is a factor that affects supply?
Production cost is a factor that affects supply because when the cost of making a product is low more goods will be supplied as it is cheaper.
Why technology is a factor that affects supply?
Technology is a factor that affects supply because improvements in technology and machinery make it cheaper for goods to be produced and so INCREASE supply.
Why the environment is a factor that affects supply?
The environment is a factor that affects supply because good/bad weather can affect a crop. Bad weather might mean there is LESS supply of wheat. GOOD WEATHER might mean that there is a SURPLUS of wheat and that SUPPLY is HIGHER than DEMAND
What is a demand curve?
This is a graph that tells us the expected demand for a product at different price levels.
What is a supply curve?
This is a graph that illustrates the quantity of a product that a seller will supply at different price levels.
What happens to PRICE when DEMAND is greater than SUPPLY?
The price increases.
What happens to PRICE when SUPPLY is greater than DEMAND?
Price will decrease.
What is the market equilibrium?
In the marketplace, supple and demand interact until a balance or equilibrium position is reached.
This occurs when SUPPLY is EQUAL to DEMAND
This point means that all sellers are willing to supply at this price and all buyers are willing to buy at this price.
It is the point where the demand curve and the supply curve cross.
