1.2

Question 1

Factors leading to Changes in demand

Answer 1

Price of subsitute
Price of complimentary goods
Changes in consumer income
Fashion and trends
Seasons

Question 2

External shocks

Answer 2

-business can’t control

Competition
Gov (raise taxes)
Economic climate
Social and environmental factors

Question 3

Demand

Answer 3

The amount of product the customers are willing and able to purchase

Question 4

Necessities luxuries and inferior goods

Answer 4

• demand changes in relation to income
  -if income rises maybe more luxuries will be bought however is income reduces these may be cut.
  -if income rises customers may switch to better quality products.

Question 5

Factors leading to change in supply

Answer 5

-changes in cost of production
-new technology
-taxes
-external shocks

Question 6

PED formula

Answer 6

%change in quantity/price
Always negative

Question 7

Elastic demand

Answer 7

Demand for product is sensitive to change in price

More than -1 e.g -1.5

Question 8

inealstic

Answer 8

Very little change due to price

Less than -1 e.g -0.8

Question 9

YED (income elasticity of demand)

Answer 9

%change in demand/income

Inferior- less than 0
normal-0.1-1.5
Luxury- bigger than 1.5

Question 10

Supply

Answer 10

Is the quantity of a good or service that a producer is willing and able to supply

Question 11

Equilibrium

Answer 11

The state of balance between market demand and supply, no excess demand of supply

Question 12

Normal good

Answer 12

Is price rises demand falls vice versa , negative correlation.