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Market 1.2
Theme1
| Term | Definition |
|---|---|
| Define Income Elasticity of Demand | Measure of the sensitivity of changes in demand to changes in income |
| What is the IED Formula? | % change in demand / % change in income |
| What is the IED of Luxury Goods? | Greater than 1 |
| What is the IED of Normal Goods? | If IED is positive it is a normal good |
| What is the of IED Inferior Goods? | If IED is negative it is an inferior good |
| What is the IED for Luxury goods and services? | IED Greater than 1 |
| How do you work out % changes in figures e.g. 20 going up to 30? | 30-20 = 10 10 x 100/20 = 50% |
| What is the IED of Necessity Goods? | IED of between 0 and 1 |
| State three factors that Influence IED | Recession/Consumer Incomes/Economic Growth |
| What are the effects on substitute/inferior goods during a recession? | Demand for substitute goods and inferior goods will rise and the demand for luxury goods will fall sharply |
| What is a definition of Price Elasticity of Demand? | A measure as to what extent sales of a product are affected by a change in its price |
| What is the PED Formula? | % change in demand / % change in Price |
| If PED is is less than 1 what does this mean? | Demand is price elastic |
| If PED is greater than 1 what does this mean? | Demand is price elastic |
| What is the effect of price rise on Price Elastic Product? | Total revenue will fall |
| What is the effect of a price rise on Price Inelastic Product? | Total revenue increases |
| What is the effect of a price cut on Price Elastic Product? | Total revenue increases |
| What is the effect of a price cut on Price Inelastic Product? | Total revenue falls |
| State two problems of Price Elasticity of Demand | Price elasticity will change over the period of the economic cycle e.g. it will be affected in a recession/Tastes and fashions are constantly changing/difficulty in finding accurate information |
| Define Supply | The amount of a good or service that producers are willing and able to sell at any given price |
| What is a Supply Curve? | A graphical representation of the relationship between price and quantity |
| What is meant by Price Equilibrium? | Found where supply and demand are equal. This is the point where both sellers and buyers are happy with the price and quantity. |
| What are Market Forces? | Push prices towards market equilibrium – the price at which demand equals supply |
| What happens to supply as prices rise? | As price rises quantity supplied increases |
| What happens to supply as prices fall? | As price falls quantity supplied decreases |
| What are factors/costs of production? | Inputs available to supply goods and services in the economy e.g. Land (Natural resources available for production) and Labour (Human input into the process) |
| Define Taxation | Charge placed on individuals or firms |
| Explain Indirect Taxes | Those placed on goods and services produced by individuals and firms e.g. VAT and Duties |
| Define Subsidies | Involve finance provided by the government to encourage suppliers to produce goods and services. Subsidies will make it cheaper to produce a product therefore, the quantity supplied of that product will increase |
| What are External Shocks and provide two examples? | Unexpected events that are outside of the businesses control but have a direct impact on the level of supply e.g. outbreak of a disease (bird flu) |
| Explain what happens to the supply curve if there is an increase in supply? | If the change in supply is caused by any factor other than price then the supply curve shifts e.g. An increase in supply is shown by a shift to the right and a decrease in supply is shown by a shift to the left |
| What are Demographic Factors and provide three examples? | Statistical characteristics of the population, these include for example: Age, Migration, Gender and Ethnic mix |
| Describe Seasonality | Refers to fluctuations in demand depending upon the time of year. It exists because of: Changes in the weather and Public holidays e.g. Christmas and Ramadan. |
| What are Substitute Products? Provide examples | Acts as an alternative, therefore creating competition e.g. Coca cola and Pepsi |
| Define the Demand Curve | Graphical representation of the relationship between price and quantity demanded. As price falls quantity demanded rises and as price rises quantity demanded falls. |
| Define Demand | The amount society is willing and able to buy at a set price at a given point in time |
| Explain what a normal good is | One where, if price rises, demand will fall and vice versa i.e. there is a negative correlation |
| Explain what happens to the demand curve if there is an increase in demand | An increase in demand is shown by a shift to the right.A decrease in demand is shown by a shift to the left |
| Define Market | Any place where buyers and sellers meet to trade products |
| State three determinants of Demand | Income/Price of other goods/Tastes and preferences/ expectations of future prices e.g. you think the product may fall in price in the near future |
Created by:
durquhart1
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