1.2 market Flashcards
(43 cards)
What is demand
The number of goods/services customers are willing to buy at a given price
What are 5 non price factors affecting demand
Price of other goods (compliments and substitutes)
Changes in tastes and fashion
Changing demographics
Advertising and branding
Changes to income
How does the price of compliments affect demand
Complimentary goods are consumed together. If one rises in price then the demand for the other one will decrease, as overall price increases. E.g. Printer and Ink
How does the price of substitutes affect demand
Substitute goods are replacement goods. Similar products sold by different businesses
How do changes in consumer incomes affect demand
As consumers income rises, demand for normal goods increase e.g. branded goods
If consumers income falls demand for inferior goods increase e.g. own label products
How do fashion tastes and preferences affect demand
If goods or services become more fashionable then demand for them increases.
And the opposite
How does advertising and branding affect demand
More money spent on advertising and branding = Increase in consumer awareness and brand loyalty
How does demographics affect demand
If the size or structure of a country’s population changes then demand for goods/services will too.
e.g. decrease in the number of babies born = decrease in demand for baby products
How can seasonality affect demand
Demand varies at different times of the year
for example during cold climates the demand for warm coats increases
How do external shocks affect demand
unexpected events can lead to a change in demand.
e.g. Outbreak of covid lead to increase in demand of toilet roll due to panic buying.
Increase in demand for face masks.,
Define supply
Supply is the number of goods/services businesses are willing to sell at a given price in a specific time period
What are 5 non price factors affecting supply
Changes in cost of production
New technology
External shocks
Indirect taxes
Government subsidies
How does changes in the costs of production affect supply
Increase in cost of production makes it more expensive to produce each unit of a good. This means that a business will be able to produce less at a given price
How does new technology affect supply
Advances in technology will lead to lower costs of production. This means business can produce more at a given price.
How do indirect taxes affect demand
If the government was to increase indirect taxes on businesses then the cost of production will increase as the firm has to pay extra costs.
This means the business can produce less at a given price
How do government subsidies affect demand
If a subsidy is given by the government to a business then it will reduce the costs of production
What is a subsidy
A subsidy is an amount of money paid to the firm by the government for each unit produced
How do external shocks affect supply
An unexpected event can affect supply
e.g. covid caused many hotels, bars and restaurants to close down. This decreases supply
What is a market
A market is any place that brings buyers and sellers together to trade at an agreed price
How is the market equilibrium met
Sellers will gradually adjust prices until their is a price and quantity that works for both parties
What does PED measure
How responsive the change in quantity demanded is to a change in price
What is the calculation for PED
%change in quantity demanded / % change in price
how do you workout % change
(new -old) / old
PED will always be negative. True or false
True
