Business Section 1.2- The Market

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Demand
Measures the level of interest consumers have in buying the product.
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Factors affecting demand...
Price, Price of other goods (substitutes and compliments), Changes in consumer income, Fashion and Trends and Seasonal factors.
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What does the demand curve tell us?
It tells us that as the price for the item increases the demand for the product falls. As fewer people are perpared to pay the higher pices.
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Demand Summary
Higher the price, the lower the demand. Lower the price, Higher the demand. A change in the price of a good affects the amount demanded, it does not affect demand for the good itself.
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Supply
The amount of goods that producers are willing to supply/sell at a given price.
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What does the supply curve tell us?
That businesses want to supply their products at the highest possible price. So that it earns them the most amount of profit.
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Supply Summary
Suppliers want high prices, but consumers want low prices.
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The point of Equilibrium
The point of equilibrium is where the supply and demand curve meet, and this sets the market price.
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What is meant by price elasticity of demand?
When the price goes up, by how much do sales fall. Elasticity measures the responsiveness of a product to a change.
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PED Formula
% change in quantity demanded DIVIDED BY % change in price.
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What is meant by income elasticity of demand?
The extent to which demand for a product changes when there is a change in consumers income.
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Other cards in this set

Card 2

Front

Price, Price of other goods (substitutes and compliments), Changes in consumer income, Fashion and Trends and Seasonal factors.

Back

Factors affecting demand...

Card 3

Front

It tells us that as the price for the item increases the demand for the product falls. As fewer people are perpared to pay the higher pices.

Back

Preview of the back of card 3

Card 4

Front

Higher the price, the lower the demand. Lower the price, Higher the demand. A change in the price of a good affects the amount demanded, it does not affect demand for the good itself.

Back

Preview of the back of card 4

Card 5

Front

The amount of goods that producers are willing to supply/sell at a given price.

Back

Preview of the back of card 5
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