Topic 3: Markets

Question 1

LAW OF DEMAND

Answer 1

as the price of a produce rises (consumer) demand for the product falls OR as the price of a produce falls, (consumer demand for the product rises

inverse relationship between price and demand

Question 2

INDIVIDUAL DEMAND

Answer 2

what one consumer demands for a product

Question 3

MARKET DEMAND

Answer 3

what all individual consumers demand for a product

Question 4

DEMAND SCHEDULE

Answer 4

a table showing the prices and quantity demanded
- this is then used to create a graph

Question 5

FACTORS AFFECTING DEMAND: PRICE

Question 6

FACTORS AFFECTING DEMAND: COMPLIMENTS AND SUBSTITUTES

Question 7

FACTORS AFFECTING DEMAND: EXPECTED FUTURE PRICES

Question 8

FACTORS AFFECTING DEMAND: TASTE AND PREFERENCE

Question 9

FACTORS AFFECTING DEMAND: INCOME LEVELS

Question 10

FACTORS AFFECTING DEMAND: SIZE AND AGE DISTRIBUTION OF POPULATION

Question 11

MOVEMENT ON THE DEMAND CURVE

Answer 11

a movement (between points) along the demand curve is reflective of price changes for a g/s
- application of law of demand

Question 12

CONTRACTION

Answer 12

price has increased and quantity demanded has fallen/decreased

e.g coffees from the canteen go from $4 to $6

Question 13

EXPANSION

Answer 13

price has decreased and quantity demanded has risen/increased

e.g dog food cans go on sale from $3 to $2.50

Question 14

SHIFTS IN THE DEMAND CURVE

Answer 14

a shift in the demand curve is the creation of a whole new curve resulting from changes in anything OTHER THAN PRICE

e.g government intervention
changes in substitute and complementary good prices/availability
consumer tastes

Question 15

CURVE SHIFT TO RIGHT

Answer 15

curve shift to right = more
increase in demand -> consumers want more of a g/s

still the same price but more consumers want it (increase in demand)

e.g fidget spinners in 2018 (a fad)

Question 16

CURVE SHIFT TO LEFT

Answer 16

curve shift to left = less
decrease in demand -> consumers want less of a g/s

still the same price but less consumers want it

e.g making slime now is no longer as cool as it was in 201@

Question 17

PRICE ELASTICITY OF DEMAND

Answer 17

refers to the responsiveness of consumer demand for a product when price changes

Question 18

INELASTIC

Answer 18

price goes up; total outlay goes up

e.g electricity or life-saving medication

Question 19

UNIT ELASTIC

Answer 19

price goes up; total outlay remains the same

e.g maccas frozen coke

Question 20

ELASTIC

Answer 20

price goes up; total outlay goes down

e.g luxury goods such as Iphones

Question 21

FACTORS AFFECTING PRICE ELASTICITY OF DEMAND: THE EXISTENCE OF CLOSE SUBSTITUTES

Answer 21

if you can easily switch from one good to another, the price elasticity for either good tends to be elastic (responsive to change)
e.g pepsi is elastic as you can buy coke instead

if there are no substitutes it tends to be inelastic
e.g insulin for diabetes

Question 22

FACTORS AFFECTING PRICE ELASTICITY OF DEMAND: NECESSITIES VS LUXURIES

Answer 22

if you think something is a necessity, your demand will tend to be more inelastic
e.g bread and milk

for something you think is a luxury, your demand will tend to be more elastic
e.g BMWs

Question 23

FACTORS AFFECTING PRICE ELASTICITY OF DEMAND: PROPORTION OF INCOME SPENT ON THE GOOD

Answer 23

the price elasticity of demand tends to be low when spending on a good is a small portion of their available income
-> a change in price exerts little impact on the consumer’s propensity to consume

e.g gum increasing in price

Question 24

FACTORS AFFECTING PRICE ELASTICITY OF DEMAND: TIME PERIOD SINCE A PRICE CHANGE

Answer 24

the longer the time period you look at, the more elastic demand will become as you have more time to find substitutes

e.g price rise in new cars = people are likely to repair old ones (not buy new ones -> elastic demand)