theme 1.2 - market

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  • Created by: study.1
  • Created on: 02-01-25 23:09
supply
the quantity of a good/service a producer is willing and able to produce in the market, at a given price, in a given period of time
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factors determining how much a firm supplies
- profit
- production and costs
- competition
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non price factors affecting supply
- cost of production
- new technology
- indirect taxes
- government subsidies
- weather
- external shocks
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illustration of supply
upwards slope
- shows relationship between price and quantity
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what supply curves show
- as price and quantity rises, supply curve shifts to right (increase)

- as price and quantity falls, supply curve shifts to left ( decrease)
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Equilibrium
the point where supply = demand
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impact of excess supply
less demand = price decreases = less output
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impact of excess demand
less available goods = higher prices = rationing
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PED
a measure of responsiveness of demand to a change in price
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PED formula
change in %price /change in %change in quantity demanded
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price elastic
change in quantity demanded is greater than change in price
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price inelastic
change in quantity demanded is less than change in price
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factors affecting PED
- availability of substitutes
- branding
- time
- income
- nature of good (luxury/necessity)
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limitations with PED
- tastes and fashions constantly change
- price elasticity change over different price ranges
- price elasticity change over the period of the economic cycle
- difficulty in finding accurate information
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Importance of PED
- in aiding marketing decisions, sales forecasting and pricing strategies
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YED
percentage change in demand following a percentage change in income
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YED formula
change in % quantity demanded/ change in% income
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YED values
negative number = income elastic = inferior goods bought more when income falls and less when income rises

positive number = income inelastic = luxury goods bought less when income falls and more when income rises
normal goods, demand is unresponsive to
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Factors determining YED
- luxury/necessity
- consumers level of income
- spending on luxury goods, as consumer income rises
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Other cards in this set

Card 2

Front

factors determining how much a firm supplies

Back

- profit
- production and costs
- competition

Card 3

Front

non price factors affecting supply

Back

Preview of the front of card 3

Card 4

Front

illustration of supply

Back

Preview of the front of card 4

Card 5

Front

what supply curves show

Back

Preview of the front of card 5
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