Theme 1 - Demand and Supply Diagrams

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  • Created by: becky.65
  • Created on: 13-04-17 11:53
What is demand?
The quantity of a good or service that people are willing to buy at a given price, at a given time
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What is the relationship between price and quantity demanded?
As price rises, quantity falls and vice versa
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How do you draw a demand curve?
The vertical axis shows the price and the horizontal axis the quantity demanded. The demand curve slopes down from left to right - as prices fall, quantity demanded rises
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What does a change in price cause on the demand curve?
A movement along the demand curve - lower prices attract more customers
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What is a shift in the demand curve caused by?
A change in any factor other than price
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Where does a decrease and increase in demand shift the curve to?
Decrease = left Increase = right
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What impact do substitute goods have on the demand of a good?
If the price of a substitute good increases, the demand curve for the original good shifts to the right
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What impact do complementary goods have on the demand of a good?
If the price of a complement increases, the demand curve for the original good shifts to the left. If the price of a complement decreases, the demand curve for the original good shifts to the right
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What impact do changes in real incomes have on the demand of a good?
For normal goods, as real income rises so does the quantity demanded and as income drops, so does quantity. For inferior goods, as income increases quantity demanded falls and as income falls demand increases
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What impact do changes in tastes and fashion have on the demand of a good?
If the preference for a particular good increases, the demand curve for that good shifts to the right, if it decreases it shifts to the left
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What impact do changes in size and age distribution of the population have on the demand of a good?
As population increases or decreases so does the demand for most goods and services and if the structure of the population changes so does demand for certain goods and services
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What impact does advertising and branding have on the demand of a good?
More advertising and a strong brand shifts the demand curve to the right
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What is supply?
The amount of a good or service that producers are willing and able to provide, at a given price, at a given time
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What is the relationship between price and quantity supplied?
As P rises Q rises and vice versa. Higher prices give suppliers an incentive to produce and sell more
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How do you draw a supply curve?
The same axis as the demand curve but the supply curve slopes up from left to right
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What does a change in price cause on the supply curve?
A movement along the supply curve
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Where does a decrease and increase in supply shift the supply curve to?
Decrease = upwards and to the left Increase = downwards and to the left
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What impact do changes in the cost of production have on the supply of a good?
An increase in costs shifts the supply curve upwards and to the right because there is a less attractive profit margin. Vise versa if costs fall
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What impact does the introduction of new technology have on the supply of a good?
Technological progress allows firms to produce a good at a lower cost so the supply curve shifts down and to the right
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What impact do indirect taxes have on the supply of a good?
If the government increases tax on a good then it shifts the supply curve upwards and to the left because the costs of the producer have increased by the amount of tax
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What impact do subsidies have on the supply of a good?
Subsidies cuts the cost of production so the supply curve will shift to the right because the supplier will be willing to produce more
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What impact does the change in the number of firms in an industry have on the supply of a good?
If the output of an industry grows, the supply curve will shift down and to the right
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What impact do external shocks have on the supply of a good?
If there is a natural disaster or a poor harvest then the supply curve of a good affected will shift up and to the left
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Other cards in this set

Card 2

Front

What is the relationship between price and quantity demanded?

Back

As price rises, quantity falls and vice versa

Card 3

Front

How do you draw a demand curve?

Back

Preview of the front of card 3

Card 4

Front

What does a change in price cause on the demand curve?

Back

Preview of the front of card 4

Card 5

Front

What is a shift in the demand curve caused by?

Back

Preview of the front of card 5
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