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10 Cards in this Set
- Front
- Back
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Factors affecting Demand
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Population Advertising Substitutes Income Fashion/trends |
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Factors which cause the demand curve to shift
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Taste Income Substitutes Complements |
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Movement in Demand curve
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Movement in Supply Curve
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Factors causing the supply curve to shift
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-Change in production costs -Improvements in production methods -Change in indirect tax or subsidies -Firms expectations about future prices -Weather or natural disasters |
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Excess Supply and demand
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When the price is set above the equilibrium price, there will be too much supply in relation to demand (S>D)-Supply Surplus Where the price is set below the equilibrium market price leading to a situation where: Demand>Supply -Shortages |
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Price elasticity of Demand
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PED measures the responsiveness of QD given a change in the price (always -) >1 Price elastic 1 Unitary elastic <1 Price Inelastic 0 Perfectly inelastic Depends on: Substitutes Proportion of income Luxury o necessity Addictive/nature Time period |
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Price elasticity of supply
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PES measures the responsiveness of supply given a change in price (always +) Production lag Substitutability Stock (how perishable) Spare capacity Time period |
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Income elasticity of demand
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YED measures the responsiveness of demand given a change in income (+normal or -inferior) Elastic demand >1 = Luxury Inelastic demand <1 = Necessity |
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Cross elasticity of demand
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XED measures the demand of good A given a change in price of good B (+Substitutes, -complements) Elastic=closely related Inelastic=weakly related 0=no relationship |
