1.2 market

Question 1

what is demand?

Answer 1

• the quantity of goods or services that consumers are willing and able to buy at any given price

Question 2

what are the conditions of demand?

Answer 2

• population
• income
• related goods
• advertising
• tastes
• expectations
• season

Question 3

how do you remember conditions of demand?

Answer 3

• PIRATES

Question 4

what can a change in price lead to?

Answer 4

• an extension/contraction in demand

Question 5

what is supply?

Answer 5

• shows the quantity of goods that suppliers are willing to sell at any given price

Question 6

an increase in price will lead to a what of supply?

Answer 6

• extension

Question 7

what do the conditions of supply all effect?

Answer 7

• unit costs

Question 8

what are the conditions of supply?

Answer 8

• cost of production
• other (legislations)
• price of other goods
• technology

Question 9

how do you remember conditions of supply?

Answer 9

• COPT

Question 10

what direction will the supply curve shift to indicate that there is a reduction in quantity supplied at every given price?

Answer 10

• left

Question 11

what direction is the demand curve?

Answer 11

• downward slopping

Question 12

what is the equilibrium in the market?

Answer 12

• everything made is being sold #

- ‘market clearing’ price

Question 13

what will happen if there’s an excess of demand?

Answer 13

• price will rise to new market clearing

- a new equilibrium will be created

Question 14

what will happen if there’s an excess supply?

Answer 14

• price must fall to the new market clearing price

Question 15

what is an excess demand?

Answer 15

• price decreases which leads to an excess demand and suppliers aren’t willing to supply Q2

Question 16

what is price elasticity of demand?

Answer 16

• the responsiveness of changes in quantity demanded in relation to change in price

Question 17

what’s the formula for price elasticity of demand?

Answer 17

percentage change in price

Question 18

what’s the formula for percentage change?

Answer 18

new value - original value
————————————- X 100
original value

Question 19

what is PED greater than 1?

Answer 19

• price elastic

Question 20

what is price elastic?

Answer 20

• a change in price leads to a greater than proportionate change in demand

Question 21

what is a PED between 0 and 1?

Answer 21

• price inelastic

Question 22

what is price inelastic?

Answer 22

• a change in price leads to a lesser than proportionate change in demand

Question 23

what is a PED of 1?

Answer 23

• unit elasticity

Question 24

what is unit elasticity?

Answer 24

• a change in price leads to an exactly proportionate change in demand

Question 25

what is a PED of ∞?

Answer 25

- perfectly elastic

Question 26

what is perfectly elastic?

Answer 26

- producers can sell as much as they want at the current price

Question 27

what is a PED of 0?

Answer 27

- perfectly inelastic

Question 28

what is perfectly inelastic?

Answer 28

- consumers are willing to pay and price for a given amount

Question 29

what is quantitative data?

Answer 29

- concerned with data | - based on larger samples, therefore more valid

Question 30

what are example of finding quantitative data?

Answer 30

- surveys - telephone - postal

Question 31

what is qualitative data?

Answer 31

- based on opinions, attitudes, beliefs and intentions

Question 32

what are examples of gathering qualitative data?

Answer 32

- focus groups | - interviews

Question 33

what is sampling?

Answer 33

- involves the gathering of data from a sample of respondents - looks at target market

Question 34

what will a fall in price lead to?

Answer 34

- a rise in quantity demanded

Question 35

If PED is bigger than 1 what will a price fall lead to?

Answer 35

- rise in revenue

Question 36

if PED is less than 1 a price fall will lead to a?

Answer 36

- fall in revenue

Question 37

what factors determine PED of a product?

Answer 37

- number of close substitutes - price of product in relation to income - brand loyalty - degree of necessity/luxury - cost of substitutes

Question 38

what is income elasticity of demand?

Answer 38

- measure the responsiveness between a change in quantity demanded for good x and change in real income

Question 39

what's the formula for income elasticity of demand?

Answer 39

% change in quantity demanded ------------------------------------------------ % change in income

Question 40

what has a YED of less than 1?

Answer 40

- inferior goods

Question 41

what has a YED of 0-1?

Answer 41

- normal goods

Question 42

what YED is 0-1?

Answer 42

- income inelastic demand

Question 43

what happens with demand of a product of <1?

Answer 43

- as income rises the demand for the product will fall

Question 44

what has a YED of +1?

Answer 44

- normal good

Question 45

what YED is +1?

Answer 45

- income elastic demand

Question 46

what YED does normal necessities have?

Answer 46

- low but positive

Question 47

what YED does a normal luxury have?

Answer 47

- high and positive

Question 48

what YED does a inferior good have?

Answer 48

- negative

Question 49

what can be the affects of a businesses selling high YED products?

Answer 49

- sales may fluctuate with the business cycle

Question 50

what can be the affects of a business selling low YED products?

Answer 50

- more stable demand with changes in income