business 1.2 the market

what is demand

it is the quantity of a product of service that consumers are willing to purchase at various price levels.

law of demand

the higher the price becomes the lower rate of demand from consumers

the lower price becomes the higher demand from consumers( products become more affordable)

factors leading to shift of demand

price of substitutes

price of complementary products

fashion tastes and preferences

advertising and branding

demographics

external shocks

seasonality

what is supply

the quantity of goods and services that producers are willing to and able to offer for sale at differnt prices over a given period

causes for shift in supply

changes in cost of production

introduction to new technology

indirect taxes

government subsides

external shocks

price elastic

change in price causes a larger proportional change in demand

-1 and below

price inelastic

changes in price creates a smaller proportional change in demand

0 to 0.9

why a company would be elastic

lots of substitutes

week brand loyalty

high proportion of income

luxury

why a company would be inelastic

few substitutes

necessity

low proportion of income

strong brand loyalty