what is the structure of a supply demand curve diagram
-y axis price
-x axis quantity
- \ demand
- / supply
-dotted line from price, to line, to quantity
(STD)
what is a movement
a movement up or down the line
what is a shift
a movement of the line left or right
when does a movement occur
change in price
when does a shift occur
anything other than price change
what is supply
the amount of a good/ service that producers are willing and able to sell at any given price
what factors affect supply
-change in cost of product
-introduction of new technology
-government subsidies
-indirect taxes
-external shocks
CIGIE
how does supply change with price
-price increase: supply increase
-price decrease; supply decrease
-because if demand is high, prices rise, so supply rises to make profit
what are indirect taxes
taxes places on goods and services produced by individuals and firms eg VAT or Duties on imports
what is a shift to the right
increase in supply/demand
what is a shift to the left
decrease in supply/ demand
what is market equilibrium
where demand is equal to supply (where both lines cross)
what is equilibrium price / market clearing price
the price at which consumers will buy the same producers are willing to supply (the price at market equilibrium)
what is equilibrium quantity
the quantity at which customers can buy all they demand and there will be no unsold stock (quantity at market equilibrium)
what are market forces
factors pushing prices towards market equilibrium
eg
excess supply leads to lower prices
too much demand leads to higher prices
what is demand
the amount of a good or service that people are willing and able to buy at a given price at a given time
what is the relationship between price and demand
inverse: as price increases, demand decreases etc
what factors affect demand
-Fashions tastes trends
-Advertising and branding
-Demographics
-External shocks
-Seasonality
-Changes in prices of other goods
-Changes in consumer disposable income
what is a substitute
goods that can be consumed in place of another
what is a complement
goods that are consumed together eg car and petrol
what is a normal good
products that see a demand increase when income increases
what is an inferior good
products that see a decrease in demand when income rises
what is PED
-price elasticity of demand
-how responsive demand is to a change in price
what is price elastic
-a change in price will lead to a more than proportional change in demand
-a weak gradient curve
-more than 1
