1. Demand 0 : Is the quantity of a product that consumers are
willing and able to purchase at various prices at various amounts
of time. 0 Demand for a good will rise or fall depending on
different factors such as the price of other goods or the taste of
the public depending on if your product is elastic or inelastic. 0
A market exists wherever there are buyers and sellers of a
particular good. Buyers demand goods from the market whereas
sellers supply goods to the market.
2. Determinants of Demand 0 Advertising levels - the greater
the advertising the more people will view the product and the more
demand will rise. 0 Taste- if a clothing market, or what is the
cool thing to have. Also is the clothing seasonal or an all year
round item. 0 Income levels- when consumers have greater disposable
income they will buy the products they want but were perhaps too
expensive before.
3. Demand Curve They shift left or right when there is a change
in income, price and availability of substitutes, tastes and
preferences. Price A shift left in the demand curve from D2 to D3
as there has become a decrease in demand D3 D2 Quantity
4. Consumer Surplus Consumer surplus- the difference between
what the consumer is willing to pay and what they actually pay for
a product or service
5. Price and Consumer surplus
6. Some key terms: The Demand Curve:- the line on a price
quantity diagram which shows the level of any effective demand at
any given price. Individual Demand curve:- the demand curve for an
individual consumer or firm etc. Market demand curve:- the sum of
all individual demand curves. Consumer Surplus:- the difference
between how much buyers are prepared to pay for a good and what
they actually pay. If there was less of the product consumers would
be willing to pay more for the product expressing the law of
demand.
7. Supply 0 Supply is defined as the quantity of goods that
sellers are willing to sell at multiple prices over a period of
time. 0 Supply and Price: If the price of a good increases,
assuming no other factors change, they are likely to expand
production to take advantage of the higher prices and the higher
profits they can make. 0 Quantity supply will rise if the price of
the good rises if all other things are equal.
8. Supply Curve 0 A Supply curve shows the quantity that will
be supplied over a period of time at any given price. 0 A rise in
price will lead to a rise in quantity supplied, a fall in price
will lead to a fall in quantity supplied. - An upward sloping curve
assumes. 0 Firms are motivated to produce by profit. 0 The cost of
producing a unit increases as output increases.
9. Determinants of Supply The price of other goods. Changes in
the price of other goods can affect supply. 0 Cost of production:
If the cost of production rises at any given point of output. Firms
will raise prices to try and cancel out this increase in production
cost. 0 If they cant charge higher then profits will fall. 0 A rise
in the cost of production leads to a fall in supply. 0 Technology:
If new technology is introduced into the production process it
should lead to a fall in the cost of production due to greater
product efficiency. This means it will encourage more firms to
supply more. 0 0 Expectations of future events: if firms expect
future prices to be much higher, they may restrict supply 0
10. Producer Surplus. The difference between the market price
what the firm receives and the price at which it is prepared to
supply at . Price Quantity
11. Shifts in supply A shift to left will mean a reduction in
supply, a shift to the right will show an increase in supply
12. The law of diminishing returns 0 The more of the variable
factor of production is added to a fixed gap, the smaller the
output increase will be.
13. Market Equilibrium 0 The equilibrium is set where the
demand of a good or service equals the supply. 0 Changes in supply
and demand levels will result in a new equilibrium price being set.
0 A change in demand will lead to a shift in the demand curve, a
movement along the supply curve and a new equilibrium price and
visa versa for supply a shift in supply curve. 0 The equilibrium
price is not necessarily the price, which will lead to the greatest
economic efficiency.
14. Excess supply and demand 0 Surplus: A situation in which
quantity supplied is greater than quantity demanded. EXCESS SUPPLY
0 Shortage: A situation in which quantity demanded is greater than
quantity supplied. EXCESS DEMAND
15. Market Equilibrium Point
16. Consumer and prodder surplus 0 Consumer surplus:- the
difference between how much buyers are prepared to pay for a good
or service and how much they actually pay 0 Producer surplus is the
difference between the market price at which firms receive and the
price at which they are prepared to supply .
17. 0 An equilibrium price- the price at which there is no
tendency to change because planned sales are equal to planned
purchases. 0 0 Market clearing prices:- the price at which there is
neither excess demand nor excess supply but where everything
offered for sale is purchased. 0 0
18. Key terms 0 Complements:- in joint demand, in one demanding
good, a consumer will also be likely to demand another good- e.g
.tennis racket and tennis balls, strawberries and cream. 0
Substitutes a good, which can be replaced by another good. E.g.
PEPSI AND COLA. Many goods are demanded only because they are
needed for the production of other goods. This is known as derived
demand. Composite demand:- when a good Is demanded for two or more
distinct uses. In commercial transport, roads are in composite
demand with commercial. Joint supply:- is where two goods are
together when one good is supplied for two different purposes.