F291

Demand: The quantity that will be purchased at a particular price.

Income
Wealth
Advertising and Promotions
Taste and Fashion
Demographics
Government action
Substitutes
Complementary Goods

Supply: the quantity offered for sale by the producer

Costs
Taxes
Subsidies
Price of other products
Weather

Equilibrium: the price at which the consumers demand matches the amount suppliers will put out to the market

Price Elasticity of Demand: %age change in quantity demanded/%age change in price

<1: price elastic:flat demand curve    >1: price inelastic-steep demand curve

• luxury goods are price elastic, whereas necessity goods are price inelastic
• goods with readily available substitutes are elastic

Price Elasticity of Supply: %age change in quantity supplies/%change in price

<1: price elastic:flat supply curve    >1: price inelastic-steep supply curve

affected by:

• Barriers to Entry
• Raw Materials
• Inventory
• Time
• Spare Capacity

Competitve:

• lots of firms
• price based competition
• low barriers to entry

Oligopoly:

• few large firms dominating the market
• non-price based competition

Monopoly

• one firm with 25% or more market share
• can charge any price
• high barriers to entry