THEME 1 SECTION 2: ( THE MARKET )

Question 1

What factors can lead to changes in demand?

Answer 1

• Substitutes
• Income
• price
• Demographic
• Season

Question 2

What are 3 factors that can lead to change in supply?

Answer 2

• Technology changes
• Productivity
• Price
• Tax
• External shock

Question 3

What happens when supply exceeds demand?

Answer 3

Prices will fall in order for surplus supply to be sold easier

Question 4

What happens when demand exceeds supply?

Answer 4

Prices will rise rise as there is less to sell on and more money needs to be made to make more supply.

Question 5

What is the difference between a change in price and a change in supply and demand on a graph?

Answer 5

• Price changes cause a movement along the curve, supply and demand changes cause the curve to shift.
• A rise in supply or demand means a shift right
• A fall in supply or demand means a shift left

Question 6

Define PED

Answer 6

PED= price elasticity of demand, it shows how responsive demand is in relation to price changes. Showing whether an item is elastic or inelastic.
-Helps to price items

Question 7

Define YED

Answer 7

YED= income elasticity of demand, shows how responsive demand is to income changes on certain products .
Showing whether they’re normal goods, luxuries or inferior
-help when economic change occurs

Question 8

What figures can show whether a product is elastic or inelastic in regards to PED?

Answer 8

• IF the figure is more than one, or if in the equation the quantity demanded is greater than the price change then it is an ELASTIC good
• IF the figure is less than one, or if in the formula the quantity demanded is less than the price change it is INELASTIC

Question 9

What figures can show whether a product is a necessity/normal , luxury or an inferior good?

Answer 9

• IF it is more than 1 (positive YED) = A luxury good
• IF it is less than 1 but more than 0 (Positive YED)= A normal/necessity
• IF its a negative figure that’s less than 0 ( negative YED) = inferior

Question 10

Equation for PED

Answer 10

%change in demand / %change in price

Question 11

Equation for YED

Answer 11

% change in demand / % change in income

Question 12

what is the relationship between PED and total revenue?

Answer 12

Price and total revenue have a negative relationship, when demand is elastic = increases in price will lead to decreases in total revenue.