1.2 The Market

Question 1

Define Demand

Answer 1

demand is the quanitity of a prodcut that consumers want and are able to buy at a given price, at a particular time.

Question 2

Define Supply

Answer 2

is the quantity of a product that suppliers are willing and able to supply to a market at a given price, at a particular time.

Question 3

What happends to demand if price increases

Answer 3

Demand will decrease

Question 4

What happends to supply if price increases

Answer 4

Supply will increase. This is called a surplus as the the qualtity demanded would be less than the quality supplied so there would be a excess supply.

Question 5

What happends to supply if price decreases

Answer 5

The supply of the product will contract which means the business will stop selling the product because they won’t get any money from it.

Question 5

What happends to demand if price decreases

Answer 5

demand will increase

Question 6

What is an equilibrim?

Answer 6

Where the two cruves meet.

Question 7

What is Price Elasticiy of Demand (PED)

Answer 7

PED of a product is how much the price change affects the demand and be found using the formula:

PED = % change in quantity demanded / % change in price

If PED is bigger than 1 = Price Elastic
if PED is less than 1 = Price inelastic

Question 8

How does Price Elasticity affect Sales Revneue

Answer 8

• if the product is price elastic, a price increase will make sales revenue go down
• for price elastic products,

Question 9

What is Income Elasticity of Demand (YED)

Answer 9

shows how the demand for a product changes as incomes change. Can be calculated through:

YED = % change in quantity demanded / % change in income