Price, Supply and Demand

Question 1

Definition

Answer 1

Medium through which buyers and sellers come together to exchange goods and services

Question 2

Types of Market

Answer 2

Goods
Factor - factors of products e.g land
Commodity - raw materials
Financial

Question 3

B2B & B2C

Answer 3

B2B - Business to business

B2C - Business to consmumer

Question 4

Demand

Answer 4

The extent to which consumers are willing and able to buy a good or service at any given price over a set period

Question 5

Demand Curve

Answer 5

Usually slopes down. Movements along the curve are extensions and contractions.

Question 6

Extension

Answer 6

Increase in demand where the price falls

Question 7

Contraction

Answer 7

Decrease in demand where the price falls

Question 8

Utility

Answer 8

Consumers want to maximise utility - the measurement of the amount of satisfaction a consumer gets from consuming a given good or service

Question 9

Opportunity Cost

Answer 9

Inverse relationship between price and supply creates opportunity cost - the amount an individual has to give up to buy a good or service

Question 10

Individual vs. Aggregate

Answer 10

Individual = demand for a specific product at one company
Aggregate = demand for one product at any given price level in the whole market

Question 11

Factors Affecting Demand

Answer 11

Price changes move you along the curve, changes in the factors move the curve left for a decrease and right for an increase

Question 12

Factors Influencing Demand

Answer 12

Levels of Income

Market expectations (if price is expected to change in near future)

Size of the population

Competitor prices

Factors affecting market preferences (fashion, taste, if a good is inferior/normal)

Question 13

Types of Good

Answer 13

Normal - demand increases as income does
Inferior - demand increases as income falls
Substitute - does the same job as another
Complimentary - usually bought with another

Question 14

Total Consumer Expenditure

Answer 14

Price x quantity demanded

Question 15

Giffen and Veblen Goods

Answer 15

Giffen - staple goods with no subs, if prices increase, even if price goes up, consumers have to buy them

Veblen - luxury/exclusive goods, for which demand increase as price does

Question 16

Supply

Answer 16

The extent to which companies are willing and able to supply a product at any given price over a set time period

Question 17

Demand Curve

Answer 17

Slopes upwards. As price increases, supply does too. Movements along curve are extensions and contractions

Question 18

Profit per Unit

Answer 18

Price per unit - cost per unit

Question 19

Individual vs. Aggregate

Answer 19

Individual = supply from one supplier
Aggregate = supply from the whole market

Question 20

Aggregate Supply

Answer 20

Companies leaving or joining the market and current suppliers increasing or decreasing production will affect aggregate supply

Question 21

Factors Affecting Supply

Answer 21

Changes in factors affecting supply will move the curve right or left. Left is an increase, right is a decrease in supply.

Question 22

Factors Affecting Supply

Answer 22

Costs associated with making the good/service

Price or costs of producing substitutes

Market expectations

Number of competitors

Technological changes

Climate/weather

Question 23

Equilibrium Price

Answer 23

The price at which market supply and demand are balanced.

Question 24

Excess Supply

Answer 24

Where the price is higher than the equilibrium so there’s more supply than demand

Question 25

Excess Demand

Answer 25

Where the price is lower than the equilibrium so there's more supply than demand