Chapter 13- Demand And Supply

Question 1

A market:

Answer 1

Is a place where buyers and sellers interact and trade goods and services.

Question 2

Final Markets:

Answer 2

Actual locations where good (and services) are bought and sold, e.g. supermarkets.

Question 3

Factor Markets:

Answer 3

Where factors of production are bought and sold, e.g. labour market.

Question 4

Commodities Markets:

Answer 4

Where raw materials used in production are bought and sold e.g. oil.

Question 5

Global Market example:

Answer 5

eBay

Question 6

National Markets example:

Answer 6

Done Deal

Question 7

Black Markets:

Answer 7

Where goods are sold illegally

Question 8

What is demand?

Answer 8

The quantity of a product that consumers are willing to buy at a given price

Question 9

What is the rule for demand and low and high prices?

Answer 9

Low price = increased demand

High price = decreased demand

Question 10

Example of demand increase and decrease:

Answer 10

A laptop normally costs €500
If the price of the laptop is €350, demand will increase
If the price of the laptop is €700, demand will decrease

Question 11

What do consumers always want?

Answer 11

The LOWEST POSSIBLE PRICE

Question 12

What is supply?

Answer 12

Supply is the quantity of a product that producers are willing to sell at a given price

Question 13

What is the rule for supply when prices are high/low?

Answer 13

Low prices = decreased supply

High prices = increased supply

Question 14

Example of price affecting supply:

Answer 14

If the price of a laptop goes down, supply will decrease

If the price of a laptop goes up, supply will increase

Question 15

FACTORS AFFECTING DEMAND (8)

Answer 15

Price 
Fashion
Season
Advertising
Expectations of buyers
Income levels
Price of substitue goods 
Price of complimentary goods

Question 16

FACTORS AFFECTING DEMAND

Price

Answer 16

When the price of a good goes up, it is more expensive and so demand will fall
When the price for a good goes down, it is cheaper and so the demand will rise

Question 17

FACTORS AFFECTING DEMAND

Fashion

Answer 17

As consumer tastes change, demand for products change e.g. Furby were popular in 2001 but not anymore

Question 18

FACTORS AFFECTING DEMAND

Season

Answer 18

Demand for some products change depending on the time of year e.g. ice-cream in the summer

Question 19

FACTORS AFFECTING DEMAND

Advertising

Answer 19

Products that are heavily advertised may see an increase in demand e.g. Specsavers “What sort of cheese was that?”

Question 20

FACTORS AFFECTING DEMAND

Expectations of buyers

Answer 20

If customers expect prices to rise in the future, they may demand more now
Similarly, of customers expect prices to fall in the future, they may demand less now

Question 21

FACTORS AFFECTING DEMAND

Income levels

Answer 21

If a person’s income rises, they will demand more goods and services

Question 22

FACTORS AFFECTING DEMAND

Prices of substitute goods

Answer 22

Some goods have close substitutes. This means they can be used as alternatives to each other.
E.g. Coca Cola and Pepsi. When the price of Coca Cola goes up, some consumers may switch to the cheaper alternative of Pepsi

Question 23

FACTORS AFFECTING DEMAND

Price of complementary goods

Answer 23

Some goods are used jointly, e.g. tennis rackets and tennis balls. If the price of a tennis racket goes up, the demand for tennis balls will fall

Question 24

FACTORS AFFECTING SUPPLY (5)

Answer 24

Price
Price of related goods
Production costs
Technology
Environment

Question 25

FACTORS AFFECTING SUPPLY

Price

Answer 25

When the price of a good goes up, goods are more profitable for the producer so the supply will rise
When the price of a good goes down, goods are less profitable for the producer so they will supply less

Question 26

FACTORS AFFECTING SUPPLY

Price of related goods

Answer 26

The price of substitue and complimentary goods may cause the consumers to switch to/ stop buying our product which will affect the available supply of our product

Question 27

FACTORS AFFECTING SUPPLY

Production costs

Answer 27

When the cost of making a product is low, more goods will be supplied as it is cheaper

Question 28

FACTORS AFFECTING SUPPLY

Technology

Answer 28

Improvements in technology and machinery make it easier for goods to be made which increases supply

Question 29

FACTORS AFFECTING SUPPLY

Environment

Answer 29

Good/ bad weather can affect a crop
Bad weather might mean there is less supply of wheat
Good weather might mean there is too much supply of wheat

Question 30

What is a demand curve?

Answer 30

A graph that illustrates the expected demand for a product at different price levels

Question 31

What is a supply curve?

Answer 31

A graph that illustrates the quantity of a product that a producer will supply at different price levels

Question 32

What demand is greater than supply what happens?

Answer 32

A shortage occurs which mean the price increases

E.g. Tickets for All-Irelands sold out (demand > supply) tickets very expensive outside stadium

Question 33

When supply is greater than demand what happens?

Answer 33

A surplus occurs meaning the price decreases
E.g. Concert ticket not popular, tickets not sold out. Excess supply/ surplus, causes price decrease as people not willing to pay high price

Question 34

What is a market equilibrium

Answer 34

Is the position reached when, in the marketplace, supply and demand interact until a balance (equilibrium position) is reached

Question 35

When does a market equilibrium occur?

Answer 35

When supply is equal to demand (this is not very common)
Sellers willing to supply at this price,
Buyers willing to buy at this price