1.2 Definitions

Question 1

Define demand

Answer 1

The amount a good or service customers are willing and able to buy at a given price

Question 2

Define supply

Answer 2

The quantity of a good and service that sellers offer for sale at a given price

Question 3

Define equilibrium price

Answer 3

The price at which quantity supplied and quantity demanded are equal in a market

Question 4

Define elastic demand

Answer 4

Customers are very responsive to a change in price and easily switches to cheaper alternatives if the prices rises. The answer is always below -1

Question 5

Define inelastic demand

Answer 5

Customers are less responsive to price changes, such as necessities like petrol and electrical and the answer is always between 0 and -1

Question 6

Define unitary price elastic

Answer 6

In this rare, a 10% price increase results in a perfectly proportional 10% decrease in quantity demanded. Its not very common but could apply to some temporary situations. The answer would be -1

Question 7

Define penetration pricing

Answer 7

You start at a low price and increase the price gradually

Question 8

Define price skimming

Answer 8

You start at a high price and decrease the price gradually

Question 9

Define competition pricing

Answer 9

You price your products slightly lower or price match your competitors