The market

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Demand
The amount of a product that consumers are willing and able to purchase at a given pric. It is important because it affects the attractiveness of the market and the potential for sales.
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Demand curves
Demand can be shown on the graph Y = price X = quantity demanded
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Demand curves
Always slopes downwards because quantity demanded is low at a higher price in most markets as price for the quantity demanded will increase the increase in price will result in the level of demand falling
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Factors affecting demand
Price of complimentary products, changes in consumer income, Fashion tastes and preferences advertising and branding demographics external shocks seasonality and the price of substitute goods.
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Shifts in demand
The demand curve decreases when it moves towards the left and it increases when it moves to the right. Successful advertising will shift the demand curve to the right demand is higher at any given price point.
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Supply
The amount of a product that supplies will offer to the market as a given price. The higher the price of a particular good or service the more that will be offered to the market. Supply is influenced by how accessible and profitable the market is.
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Supply curves
Supply can be shown on the graph. The supply curve always slopes upwards because the quantity supplied will increase as the price rises. In most markets a change in price to alter the point of supply along the curve.
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Factors affecting supply
Changes in the costs of production, introduction of new technology, indirect taxes, Government subsidies and external shocks.
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Supply shifts
Supply can shift to the left which means it decreases or can shift to the right which means it increases.
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Interaction of supply and demand
At prices below the equilibrium excess supply exists.
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Changes in demand
If the market increases do you want to do to them prices will rise of P1 to P2 this is because producers will react by putting up their prices. The opposite will happen if there is a fall in demand.
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Changes in supply
If supply increases S1 2S2 then prices will fall P1 to P2 this is because there will be XS supply and produces will lower their price in order to sell all of their goods the opposite will happen if there is a fall in supply
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Impact or of price elasticity Of demand (PED)
A price change will result in a larger percentage change in quantity demanded and a smaller percentage change in the quantity demanded.
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Calculating PED
Percentage change in quantity demanded divided by percentage change in price.
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PED
Above one demand is price elastic and below 1 the demand is price elastic
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Interpreting PED
If the business was to increase prices and if they were price elastic it would lead to a bigger percentage decrease in quantity demanded therefore revenues would fall.
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Interpreting PED
If the business increased their prices and the price was elastic it would lead to a bigger percentage increase in quantity demanded therefore revenues rise.
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Interpreting PED
If the price was increased by a business and it was price in elastic it would lead to a smaller percentage decrease in quantity demanded therefore revenues rise.
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Interpreting PED
If a business decrease the price and it was priced in elastic it would lead to a smaller percentage increase in quantity demanded therefore revenue falls.
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PED impact on decision-making
When demand is price in elastic a business may be able to raise prices to increase revenue because there is a smaller percentage change in quantity demanded that the percentage change in revenue per unit.
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PED impact on decision-making
Where a product is price elastic a business will have to think very carefully about any changes it makes to its pricing strategy lowering prices could increase the quantity demanded therefore be seeing sales revenue as long as competitorsreacted.
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Factors influencing PED
Number of substitutes relative effort extent to which product is considered a necessity perceived value of the brand time and percentage of income spent on product.
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Elastic and elastic demand
The amount of income that consumers have to spend is a key factor influencing demand for product income and Leicester City of demand also known as YD measures the responsiveness of demand through to a change in incomes .
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Income elastic demand
A percentage change in incomes would lead to a proportionate or greater percentage change in quantity demanded goods that have income elastic demand include cars TVs holidays and clothing.
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Income in elastic demand
A percentage change in income is 1 L proportionately lower change in quantity demanded the products might be considered necessities such as some food types.
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Normal goods
Increase in income leads to an increase in quantity demanded they have a positive income elasticities of demand.
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Inferior goods
An increase in income will lead to a fall in demand the reverse is also true a decrease in income will lead to an increase in demand intriguers have a negative income elasticities of demand.
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Calculating income elasticities of demand YED
Percentage change in quantity demanded divided by percentage change in income.
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Impact on decision-making YED
Businesses which sell goods with a high income elasticity Will be affected by cyclical nature of economy in a recession demand falls significantly the products that have a high income elasticities of demand.
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Impact on decision-making YED
Businesses selling as I have income inelastic demand I likely to find moms and therefore sales more stable during a cup economic s businesses selling goods that have income inelastic demand are likely to find demand and sales.
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Impact on decision-making YED
Regardless of whether businesses goods are elastical inelastic it should use economic factors to help plant the changes in production.
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Factors influencing income elasticities of demand
Is the product considered a necessity? A luxury? Price relative to peoples incomes?
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Other cards in this set

Card 2

Front

Demand curves

Back

Demand can be shown on the graph Y = price X = quantity demanded

Card 3

Front

Demand curves

Back

Preview of the front of card 3

Card 4

Front

Factors affecting demand

Back

Preview of the front of card 4

Card 5

Front

Shifts in demand

Back

Preview of the front of card 5
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