1.2 The Market Flashcards
(16 cards)
What is demand?
The number of consumers that are willing to purchase a product at the price that it for sale at
What is the “Law of demand”
The cheaper the product, the higher the level of demand
What direction is the demand curve?
DOWN
What are the determiners of demand?
- Price of substitutes
- Price of complimentary goods
- Consumer income
- Tastes
- External shocks
- Seasonality
What does an inward demand curve mean?
A lower price where FEWER consumers are willing to pay
What does an outward demand curve mean?
Product at the same price however MORE consumers are willing to pay
What is supply?
The amount of a particular good or service that the producers in a market are willing to supply or create
What is the “Rule of supply”
Producers will want to produce more of a good to the market when they are confident they can achieve a higher price
What does an outward supply curve mean?
Suppliers are MORE WILLING to produce the good at a particular price
What does an inward supply curve mean?
Even though the price is the same something has led to suppliers less wanting to produce a good product
What factors lead to a change in supply
- Changes in production costs
- New technology
- Taxes and duties
- Subsidies
- External shocks
What is the formula for PED
% change in quantity demanded / % change in price
What is PED?
Measures the responsiveness of demand to changes in price
What is price elasticity?
- Value is greater than 1
- Price sensitive to a change in demand
- Increase price therefore increase revenues
What is price inelasticity?
- Value is less than 1
- Consumers are not price sensitive to a change in demand
- Increase price therefore increase revenue
WHERE THEY WANT TO BE
What is the formula for YED
% change in quantity demanded / % change in income
