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Demand: the quantity of a product that consumers are able and willing to purchase at
various prices over a period of time
Market: where or when buyers and sellers meet to trade or exchange products.
It is important to remember that a want and demand are entirely…
Inferior Goods: goods for which an increase in income leads to a fall in demand
It is difficult to generalise with inferior goods because it is different for different people.
The Price of other products:
The demand for a product can be affected by a change in price…
Determinants of Supply:
Costs of Production:
These would increase if a company had to pay more for labour or for certain natural
resources. Banks cut cost by replacing labour with machines
Size & nature of the industry:
In a competitive industry minor increases in costs can have…
Disequilibrium Price: Any position in the market where demand and supply aren't equal
In practice markets are very unstable and operate in disequilibrium, this is when we get
excess demand/ supply
Surplus: an excess of supply over demand
For example the supplier feels that their product can be…
Elasticity: the extent to which buyers and sellers respond to a change in market
They basically measure how much demand and supply changes when the factors
affecting them are involved
Price Elasticity of Demand: the responsiveness of a change in the quantity demanded to
XED = % change in QD of product A /% change in price of product B
+ is a Substitute!
- Is a Compliment!
0 means there isn't a particular relationship
Price Elasticity of Supply
The responsiveness of quantity supplied to a change in the price of the…
Peak time tends to be more inelastic because those purchasing tickets to London tend to
have to be there before 10:30.
They use business to maximise revenue, elasticity estimates allow them to see how best
to maximise their revenue.
In most economies real disposable incomes rise over…
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