Chapter 10 : Price changes

Y10 T1 EOT (chapter 7 - 12)

When do price changes occurs ?

Price changes can occur due to shifts in supply and shifts in demand (determinants of supply and demand)

How does lower supply affects the price?

Lower supply causes equilibrium quantity to fall and equilibrium price to rise. This is because, the goods is viewed as a scarcity or limited.

How does lower demand affects the price?

Lower demand causes the equilibrium quantity to fall and the price to fall. This is because, they have supply but no one wants to buy it. The only way is to sell it for cheaper.

What are the causes of a supply curve shifting to the left or right?

Changes in non-price factors. (TWO TIPS: determinants of supply)

(time, weather, opportunity cost, tax, innovation, production cost, subsidies)

What are the causes of a demand curve shifting to the left of right?

Changes in the determinants of demand. (HIS AGE)

(habits/fashion/taste, income, substitutes / compliment products, advertising, gov policies, economy, favourable weather)

State three factors that can shift the demand curve

• levels of income

• taste/habits changes

• a drop or increase in substitute products

State three factors that can shift the supply curve

• time needed to produce smth

• weather conditions

• taxes imposed on production cost