Usually, as a good's price falls, more is demanded.
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What are the Exceptions to the 'law' of Demand?
1) Speculative Demand - Price of product may rise in the near future. 2) Good for which consumers use price as an indicator of quality. 3) Veblen Goods - Goods of exclusive consumption ('snob' goods).
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What's the Difference Between a 'Movement' in the Demand Cure, and a 'Shift' in the Demand Curve?
A movement along a demand curve takes place only when the good's price changes. A shift in demand occurs when there is a change in a condition of demand.
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What are the Conditions of Demand?
1) Price of Substitute Goods. 2) Prices of goods in joint demand (complementary goods). 3) Personal Income. 4) Tastes & Preferences. 5) Population Size - influences total market size.
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What are the Factors Determining PED?
1) Substitutability - V. close substitutes = highly elastic. 2) % of Income. 3) Time - Usually more elastic in the long run.
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How can you Simply Detect whether Demand is Elastic or Inelastic?
1) If total consumer expenditure increases in response to a price fall, demand is elastic. 2) If total consumer expenditure decreases in response to a price fall, demand is inelastic.
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What are the Conditions of Supply?
1) Costs of Production. 2) Technical Progress. 3) Taxes Imposed on Firms such as VAT, excise duties & the Business Tax. 4) Subsidies granted by the gvnmt. to firms.
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What are the Factors Determining PES?
1) Length of Production Period. 2) The Availability of Stock. 3) The Ease of Accumulating Stock. 4) The Ease of Switching between Alternative Methods of Production. 5) No. of firms in a market - ease of entering the market.
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How does a Shift in Demand Disturb the Market Equilibrium?
Excess demand means limited supply, so consumers bid-up the price to get more of the good until the new price is enough for producers to supply more of the good which will eventually eliminate the excess demand & a new equilibrium is reached.
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How does a Shift in Supply Disturb the Market Equilibrium?
Excess supply may occur (e.g. with tomatoes) when there is a bumper harvest. To get rid of the unsold stock, producers reduce the price until the excess is eliminated. This will result in a lowed equilibrium price.
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Other cards in this set
Card 2
Front
What are the Exceptions to the 'law' of Demand?
Back
1) Speculative Demand - Price of product may rise in the near future. 2) Good for which consumers use price as an indicator of quality. 3) Veblen Goods - Goods of exclusive consumption ('snob' goods).
Card 3
Front
What's the Difference Between a 'Movement' in the Demand Cure, and a 'Shift' in the Demand Curve?
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