Supply and Demand Principles Flashcards
What is demand? 4 points
Demand is the consumers desire to purchase a product. They must:
*Want it.
*Be able to afford it.
*Plan to buy it.
What is quantity demanded? 2 points
The amount the a consumer plans to buy during a certain period at a given price.
Quantity demanded is not the same as quantity bought.
What is money price?
Money price is the amount of money that it takes to buy a good or service.
What is opportunity cost?
The loss of other alternatives when one option is chosen.
What is the relative price?
The price of one good or services compared with another.
What is marginal cost? 2 points
The change in total production costs that comes from producing one additional unit.
marginal cost = change in production costs / change in quantity
What is marginal revenue? 2 points
Marginal revenue is the additional revenue per unit gained from selling multiple units.
marginal revenue = increase in total revenue / increase in quantity
What is self-interest?
To seek your own personal gain.
What is a demand curve? 3 points
The demand curve is a graphic representation of the relationship between the price of a good or service and the quantity demanded. Price is on the vertical axis and quantity demanded is on the horizontal. The demand curve which expresses the law of demand will move down from left to right as the price increases the demand decreases.
What factors affect demand? 7 points
- Change in expectations eg. threat of petrol shortage.
- Change in income, normal goods eg. people buy more luxury cars if income increases.
- Change in income, inferior goods eg. people will buy less frozen food if income increases.
- Change in price of related goods, substitutes in consumption eg. CDs vs digital downloads.
- Change in price of related goods, complements in consumption eg. cinema and popcorn.
- Change in preferences eg. fashion.
- Change in number of consumers.
What is elastic demand?
Where the change in quantity demanded is large due to a change in price eg. luxury items.
What is inelastic demand?
Where quantity demanded remains constant despite price changes eg. prescriptions.
What is the supply curve? 3 points
The supply curve is a graphic representation of the relationship between the cost of a good or service and the quantity supplied for a given period. The cost appears on the vertical axis and the supply quantity on the horizontal axis. The supply curve expresses the law of supply which is: as the cost of a good increases, the quantity of goods supplied also increases.
What factors affect supply? 6 points
- Change in expectations.
- Change in the price of related goods, substitutes in production.
- Change in the price of related goods, complements in production.
- Change in input prices.
- Change in productivity.
- Change in number of sellers.
What is movement?
A change in both price and quantity resulting in a change along the existing supply or demand curve.
What is a shift?
A change in quantity demanded or supplied but the price remains constant causing the curve to change to a new position.
What is equilibrium?
When quantity supplied = quantity demanded
What is shortage?
Where quantity demanded is more than quantity supplied.
What is Surplus?
Where quantity supplied exceeds the quantity demanded.
What is it called when a change in both price and quantity results in a change along the existing supply or demand curve?
Movement.
What is it called when there is a change in quantity demanded or supplied but the price remains constant causing the curve to change to a new position?
Shift.
What is it called when quantity supplied = quantity demanded?
Equilibrium.
What is it called when quantity demanded is more than quantity supplied?
Shortage.
What is it called when quantity supplied exceeds the quantity demanded?
Surplus.
What are the construction industry supply-side factors? 8 points (2 + 6)
Scarcity of resources:
1. Land.
2. Natural resources (wood, clay, stone).
3. Building products (industrial mass produced items).
4. Labour.
5. Investment.
6. Credit.
Market regulation/ competition which can effect capacity to produce a product at a price acceptable to the buyer.
What are the construction industry demand side factors? 4 points
Need for:
1. Housing.
2. Industrial and commercial buildings.
3. Infrastructure and public buildings.
4. Repairs and maintenance.
Who creates demand in the construction industry? 5 points
- Users and potential users for the building / facilities.
- Buyer prepared to own the building / facility.
- Investor prepared to provide finance for design / construction and operation.
- Developer prepared to initiate development process.
- Conditions are favourable for the development to take place.
What is the nature of construction demand? 5 points
- New projects to meet unsatisfied need; hospitals or railways.
- New investment to expand existing provisions; increase in factory to meet demand.
- Replacement of existing building that have reach the end of their useful life.
- Alterations to an existing building to change its use; converting warehouses to houses.
- Repair and maintenance; keeping facilities in order.
What changes the demand in construction? 10 points
- Restrictions on new land.
- Demographic shift.
- Interest rates.
- Income.
- Taxation.
- Growth in consumption of goods.
- Business growth.
- Global economic factors.
- Private sector investment.
- Government investment.
What is unitary elastic demand? 3 points
When the price changes, the quantity changes proportionally meaning consumers spend the same total amount on the product before and after the change eg. someone who budgets £20 for petrol weekly would be purchasing different amounts of petrol each time but spends the same amount as the price per litre fluctuates.
