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Microeconomics ­ Demand and Supply

There are 4 factors of production:
Land ­ Natural Resources
Labour ­ Workers/employees
Enterprise ­ Risk taker who combines the other factors of production
Capital - Machinery
Basic economic needs are FINITE, SCARCE or LIMITED, they include:
Economic wants and needs are…

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Sometimes the PPC shifts outwards (to the right) due to:
Increased specialisation
Technology advancements
New resources
The curve can also shift inwards (to the right) due to:
Non-renewable resources
Natural Disasters

Competitive Markets
Market - A place where goods and services are exchanged between consumers and firms

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Market equilibrium this is established at the point where supply = demand. At this point, a
market price is agreed at p, and an equilibrium quantity bought and sold at q.

Demand shifts the right
E.g. price of substitutes increase. As a result of demand
shifting to the right, demand…

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Number of closeness of substitutes
- The greater the number of substitutes the more elastic the demand will be.
Unique goods/services
- A good or service which is unique, has no substitutes. Demand will be inelastic.
Luxury or Necessity
- Habit forming goods will be inelastic e.g. cigarettes
- Luxuries…

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Inferior goods ­ As income rises, the demand for these goods fall. Hence YED will be
Normal/Luxury goods ­ As income rises, the demand for these goods increases.
Hence YED is positive.
- If YED is negative = the good is said to be inferior
- If YED is…

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If it's easy and quick for a producer to change supply of a good in response to
changes in price then the supply of that good is described as being RELATIVELY
If it's difficult and time consuming to change supply in response to changes in price
then supply is…


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