1.2 The Market

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What are the factors leading to a change in demand?
Changes in the prices of substitute goods. changes in consumer incomes. fashions, tastes and preferences. advertising and branding. demographics. external shocks. seasonality
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What are the factors leading to a change in supply?
changes in the costs of production, new technology, indirect taxes, government subsidies, external shocks
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What is the formula for price elasticity of demand?
%change in quantity demanded / %change in price
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What factors influence price elasticity of demand?
Degree of differentiation, availability of substitutes, branding and brand loyalty
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*** does price elasticity of demand affect a business?
A firm considering prices will want to know the effect the price is likely to have on demand
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What is the formula for income elasticity of demand?
%change in quantity demanded / %change in real incomes
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What is the YED of a normal good?
Between 0.1 and 1.5
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What is the YED of a luxury good?
Over 1.5
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What is the YED of an inferior good?
Below 0
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What are the factors influencing income elasticity of demand?
If the product is a necessity, who buys the product, positive and negative elasticity
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What are the factors leading to a change in supply?

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changes in the costs of production, new technology, indirect taxes, government subsidies, external shocks

Card 3

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What is the formula for price elasticity of demand?

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Card 4

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What factors influence price elasticity of demand?

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Card 5

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*** does price elasticity of demand affect a business?

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