The Market

Question 1

What is demand?

Answer 1

the amount of a good that consumers are willing and able to buy at a given price

Question 2

What is the biggest factor leading to change in demand?

Answer 2

Price

Question 3

How does price determine demand?

Answer 3

As the price increases on a product or service, normally, the demand will decrease as less customers are willing to pay the price

Question 4

How does price of alternatives determine demand?

Answer 4

If the price of the alternative is lower a consumer could use it instead lowering the demand of the original product

Question 5

How does alternate brands determine demand?

Answer 5

If an alternative brand is available and the product is not available then this will affect demand

Question 6

How does price of compliments determine demand?

Answer 6

As the prices of these complimentary goods rise then demand for the main product falls

Question 7

How does changes in consumer income determine demand?

Answer 7

As consumer incomes rise then demand for some products falls eg. Microwaved meals and demand will increase for other products eg. Holidays and luxury items

Question 8

How does trends determine demand?

Answer 8

As trends in goods and services rise then demand for these products rise

Question 9

How does marketing determine demand?

Answer 9

Marketing can also stimulate demand e.g. promotions can help to encourage sales- McDonald’s monopoly

Question 10

How does advertising determine demand?

Answer 10

Advertising can call the public’s attention to a product or service creating demand

Question 11

How does the demographic determine demand?

Answer 11

The UK population is getting older, this means that different products and services will be in higher demand

Question 12

How does the time of the year effect the demand?

Answer 12

Some products reach peak demand at certain times of the year in the UK

Question 13

How does the weather determine the demand?

Answer 13

Some products have a seasonality factor and may be affected by the weather

Question 14

How does external shocks effect demand?

Answer 14

External shocks such as; terrorism, war, disease and health scares can change demand

Question 15

What are the non price determinate of supply?

Answer 15

• Cost of production
• Introduction of new tech
• governments subsidies
• External shocks

Question 16

How does cost of production affect supply?

Answer 16

If the cost of production increases a business may produce less because it’ll cost more per unit or increasing the price of the item

Question 17

How does introduction of new technology affect supply?

Answer 17

Newer technology leads to more efficient ways of producing and an increase in supply

Question 18

How does indirect taxes affect supply?

Answer 18

An increase of tax on a product makes it cost more to supply meaning a decrease in supply

Question 19

How does government subsidies affect supply?

Answer 19

Increases supply because the cost have been lowered thanks to the subsidy

Question 20

How does external shocks affect supply?

Answer 20

Can disrupt transport leading to a decrease in supply

Question 21

What is the market clearing price?

Answer 21

The equilibrium price in a market where supply and demand are equal

Question 22

What is the link between demand and price?

Answer 22

When prices go up customers demand less

Question 23

What is PED?

Answer 23

Price elasticity of demand

Question 24

What is the PED formula?

Answer 24

% change in quantity demanded
__________________________________
% change in price

Question 25

What does a PED value of mean?

Answer 25

Elastic demand - Value will be more than 1

Inelastic demand - Value will be between 0 and 1