Markets in action

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  • Created by: Jess
  • Created on: 21-04-14 11:05

Market: where/when buyers and sellers meet to trade or exchange goods and services.

  • Demand: the quantity of a product that consumers are able and willing to purchase at various prices over a period of time
  • Notional demand: the desire for a product
  • Effective demand: the willingness and ability to buy a product

Relationship between price and quantity demanded:

  • there is an inverse relationship between price of a product and the quantity demanded 
  • the lower the price, the more that will be demanded
  • the higher the price, the less that will be demanded
  • (assuming that consumers are rational)
  • Movement along the demand curve: this is in response to a change in the price of a product

Consumer surplus: the extra amount that a consumer is willing to pay for a product above the price that is actually paid

(http://www.economicshelp.org/wp-content/uploads/blog-uploads/2008/01/mu-consumer-surplus-demand.png)

Factors that effect change in demand:

  • change in consumer income
  • change in price of subsitutes 
  • change in price of complements
  • change in tastes and fashion

Change in demand: this is where a change in a non-price factor leads to an increase or decrease in demand for a product

  • Disposable income: income after taxes on income have…

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