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Demand
The market is made up of buyers and sellers who meet to trade a
particular good/service. It is the buyers who create the demand for a
product: Demand refers to the quantity of a product that purchasers are
willing to buy at each and every price, per period of…

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price that consumers are willing to pay, hence increasing the welfare that consumers derive
from buying the good.
If the price increases, the consumer surplus will decrease, as there will be a smaller
difference between the price payed and the price that consumers are willing to pay, hence
decreasing the…

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to reduce supply and consumption of a product e.g. alcohol, cigarettes. (By increasing
production costs.)
Subsidy: a payment by the government to a firm to encourage the production of a particular
good e.g. vegetables

Producer Surplus: the difference between the price that firms are willing to accept and the
price…

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If the price is too high (above equilibrium) then there will be a greater quantity supplied than
quantity demanded. This is known as a surplus.
If the price is too low (below equilibrium) then there will be a greater quantity demanded
than quantity supplied. This is known as a shortage.


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