Theme 1 - Section 2 (The Market)

Question 1

What is demand ?

Answer 1

the quantity of a product that consumers want and are able to buy, at a given price at a particular time.

Question 2

What is supply ?

Answer 2

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

Question 3

the deamand curve usually slopes …

Answer 3

Downward

Question 4

The deamnd curve shows that……

Answer 4

as the price of a product increases the demand decreases.

Question 5

The supply curve slopes …..

Answer 5

Upward

Question 6

The supply curve shows that ….

Answer 6

The higher the price charged for a product, the higher the quantity supplied.

Question 7

Increasing supply also increases…..

Answer 7

costs, therefore a business will only produce more if the price increases by more than the costs.

Question 8

What is the equalibrium price ?

Answer 8

when amount demanded matches amount supplied.

Question 9

8 factors that influence demand.

Answer 9

• Substitutes
• Compementary products
• consumer income
• Fashion
• Advertising and branding
• Demographics
• seasonal changes
• External shocks

Question 10

six factors effecting supply.

Answer 10

• cost of production
• Indirect taxes ( taxes on production )
• subsides
• New technology
• weather conditions
• External shocks

Question 11

A rise in demand shifts the demand curve….

Answer 11

right

Question 12

A fall in demand shifts the demand curve….

Answer 12

left

Question 13

A rise in supply shifts the supply curve …..

Answer 13

right

Question 14

A fall in supply shifts the supply curve …..

Answer 14

left

Question 15

A surplus occurs when price ….

Answer 15

increases

Question 16

A shortage occurs when price ….

Answer 16

decreases

Question 17

Price elasticity of demand shows…..

Answer 17

how demand changes with price

Question 18

PED =

Answer 18

        % change in price

Question 19

If the products PED in more than 1, the product is ……

Answer 19

price elastic

Question 20

If the products PED is less than 1, the product is ……

Answer 20

price inelastic

Question 21

For Price elastic products ….

Answer 21

The change in demand is greater than the change in price

Question 22

For Price inelastic products …..

Answer 22

The change in price is greater than the change in demand.

Question 23

What is a necessity

Answer 23

A product whos demand does not change even if there is a change in price. e.g. fuel, milk. (Necessitys are price inelastic.)

Question 24

If customers are able to switch to other substitute products price is uaually

Answer 24

Elastic

Question 25

why would businesses try to create brand loyalty ?

Answer 25

So customers do not choose to buy from their competitiors.

Question 26

If products are easy to find it causes products to be ....

Answer 26

elastic

Question 27

Products that customers buy more regularly tend to be ...

Answer 27

price inelastic, as they could be seen as a necessity.

Question 28

Sales revenue = .......

Answer 28

selling price x sales volume

Question 29

If a product that is price elastic, how would a company produce a higher sales revenue ?

Answer 29

By decreasing the price.

Question 30

For price inelastic produst if you decrease the price what happens ?

Answer 30

Sales will increase slightly, but the sales revenue will go down because the price has fallen and only a few units will have been sold.

Question 31

Income elasticity of demand shows.....

Answer 31

Demand changes with income

Question 32

when will the avarage persons income increase ?

Answer 32

During economic growth

Question 33

when will the avarage persons income decrease ?

Answer 33

During ressesion

Question 34

Factors that could affect a change in someomes income....

Answer 34

- changing jobs - Getting promotion - pay rise - being dissmissed

Question 35

Income elasticity of demand ( YED ) =

Answer 35

% change in quantity demanded ------------------------------------------------ % change in income

Question 36

Positive income of elasticity means a product is .....

Answer 36

A normal product

Question 37

Negative income elasticity means a product is .....

Answer 37

A inferior product

Question 38

What are Necessity products in terms of YED

Answer 38

- have a positive YED less than 1 - example ( fruit and vegetables) - As income rises demand rises but at a slower rate than the increase in income.

Question 39

What are Luxury products in terms of YED

Answer 39

- have a positive YED more than one - example ( fine wines, designer clothes ) - As income rises demand rises at a faster rate than the increase in income

Question 40

What are inferior products in terms of YED

Answer 40

- Off brand, cheaper products, usually seen as an alternative - examples ( off brand baked beans ) - hve a negative YED - when demand rises when income falls.