Theme 1 Topic 12 - Demand and Supply Flashcards
Define Demand
The number of customers willing and able to purchase a product at the given demand
Define Demand Curve
Shows the relationship between the quantity demanded and the price of a product
When the price is increased, quantity demanded…
Decreases
When price decreased, quantity demanded…
Increases
What are the eight factors which cause a change in demand? (PLASTICQ)
Population and demographic, Laws, Advertising and branding, Substitute goods, Tastes and fashions, Income, Complimentary goods, Quality
Define Supply
Refers to the quantity of a product that producers are willing and able to provide at different market prices over a given time period
When price increases, the amount supplied…
Increases
When price decreases, the amount supplied…
Decreases
Why does an increase in costs reduce the amount suppliers are willing to supply at each given price?
An increase in costs reduces their potential profit so they have less incentive to supply more at each price
What are four factors affecting supply?
Cost of raw materials, New technology, Wage costs, Indirect taxes e.g. VAT
Define Market Equilibrium
When quantity demanded and quantity supplied are equal in a market
Define Shortage
Occurs when quantity demanded exceeds quantity supplied
Define Surplus
Occurs when quantity supplied exceeds quantity demanded
What is price determined by?
Demand and Supply
