The Market Flashcards
What is demand?
the amount of a good that consumers are willing and able to buy at a given price
What is the biggest factor leading to change in demand?
Price
How does price determine demand?
As the price increases on a product or service, normally, the demand will decrease as less customers are willing to pay the price
How does price of alternatives determine demand?
If the price of the alternative is lower a consumer could use it instead lowering the demand of the original product
How does alternate brands determine demand?
If an alternative brand is available and the product is not available then this will affect demand
How does price of compliments determine demand?
As the prices of these complimentary goods rise then demand for the main product falls
How does changes in consumer income determine demand?
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
How does trends determine demand?
As trends in goods and services rise then demand for these products rise
How does marketing determine demand?
Marketing can also stimulate demand e.g. promotions can help to encourage sales- McDonald’s monopoly
How does advertising determine demand?
Advertising can call the public’s attention to a product or service creating demand
How does the demographic determine demand?
The UK population is getting older, this means that different products and services will be in higher demand
How does the time of the year effect the demand?
Some products reach peak demand at certain times of the year in the UK
How does the weather determine the demand?
Some products have a seasonality factor and may be affected by the weather
How does external shocks effect demand?
External shocks such as; terrorism, war, disease and health scares can change demand
What are the non price determinate of supply?
- Cost of production
- Introduction of new tech
- governments subsidies
- External shocks
How does cost of production affect supply?
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
How does introduction of new technology affect supply?
Newer technology leads to more efficient ways of producing and an increase in supply
How does indirect taxes affect supply?
An increase of tax on a product makes it cost more to supply meaning a decrease in supply
How does government subsidies affect supply?
Increases supply because the cost have been lowered thanks to the subsidy
How does external shocks affect supply?
Can disrupt transport leading to a decrease in supply
What is the market clearing price?
The equilibrium price in a market where supply and demand are equal
What is the link between demand and price?
When prices go up customers demand less
What is PED?
Price elasticity of demand
What is the PED formula?
% change in quantity demanded
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% change in price
What does a PED value of mean?
Elastic demand - Value will be more than 1
Inelastic demand - Value will be between 0 and 1
