Theme 1.2 Market

Question 1

Formula for Price Elasticity?

Answer 1

% change in demand
% change in price

Question 2

Demand?

Answer 2

the amount that society is willing and able to buy at a set price at any given point in time

Question 3

What is the demand curve?

Answer 3

a straight line on a curve that shows us how many quantities will be sold per price
If price decreases, QD increases

Question 4

What is the demand curve?

Answer 4

a straight line on a curve that shows us how many quantities will be sold per price

Question 5

5 factors leading to a change in demand?

Answer 5

Changes in price of substitutes/complementary goods

Change in consumer incomes

Seasonality

Advertising

Fashion, tastes and preferences

Question 6

What is a substitute?

Answer 6

A product that acts as an alternative, creating competition e.g. Samsung and Apple

Question 7

What is a complementary good?

Answer 7

A product that is bought alongside a good or service e.g. chips with fish

Question 8

Is the relationship between price and quantity demanded positive or inverse?

Answer 8

inverse

Question 9

5 factors that lead to changes in supply?

Answer 9

Change in production cost - wages, raw materials, energy prices

Introduction of new technology - Cheaper in long run as less labour needed, cheaper per unit

Indirect taxes - Value added taxes, if taxes are increased it makes cost per unit more expensive

External Shocks - Unexpected events out of businesses control but have direct impact on level of supply (natural disasters, inflation, COVID)

Government subsidies - Finance provided by the government to encourage suppliers to produce making it cheaper for them

Question 10

What is supply?

Answer 10

the amount of a good or service that produces are willing and able to sell at any given price

Question 11

What does the supply curve indicate?

Answer 11

If suppliers are paid more, they will offer higher quantity supply

Question 12

What is a normal good?

Answer 12

One where if consumer income increases, demand will increase and visa versa (has a + sign)

Question 13

What is a subsidy and why is it good for the business?

Answer 13

Finance provided by government to encourage suppliers to produce —> cheaper to produce a product

Question 14

What is an external shock?

Answer 14

Unexpected events out of the businesses control but have a direct impact on level of supply e.g. natural disasters, inflation

Question 15

What is an indirect tax?

Answer 15

value added taxes or duties that makes the cost per unit more expensive

Question 16

Price inelastic?

Answer 16

that if the price changes demand will not significantly change (less than one)

Question 17

5 factors influencing PED

Answer 17

availability of substitutes
Price of competitor goods
Branding
Income
Nature of the good (luxury or necessity)

Question 18

Income elasticity of demand (YED)?

Answer 18

a measure of the responsiveness of demand to a change in income

Question 19

Inferior goods?

Answer 19

when income increases, the demand for a product decreases and visa versa (has a - sign)

Question 20

Formula for YED?

Answer 20

% change in demand/ % change in income

YED can be negative or positive

Question 21

3 Factors influencing YED of a product?

Answer 21

Whether the good is a luxury or necessity

Level of income of consumer (poorer consumers spend their income of necessities)

As income increases, they’re more likely to spend money on luxuries

Question 22

What is income inelastic?

Answer 22

below 1, and the demand will not change much

Question 23

PED?

Answer 23

a measure of responsiveness to of a good’s demand to a change in price