Edexcel A Level Business - Theme 1.2
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23 Terms
what does demand mean
the amount a customer is willing to purchase at a given time and price
which 2 factors can affect demand and supply
price factors and non price factors
price and demand relationship
as price goes up, demand falls
non price factors that can affect demand
price of substitutes
alternative brands
price of compliments
trends
time of year
external shocks
changes in income
climate
what does supply mean
the amount of a business good or service a business is willing to make available on the market at a given time
what perspective is supply from and what perspective is demand from
supply = business
demand = customer
price and supply relationship
as price increases, supply increases
5 non price factors that affects supply
cost of production
government grants
external shocks
in direct taxes
new technology
what does PED stand for
price elasticity of demand
what does PED mean
the sensitivity of demand in response to a change in price. can be elastic or inelastic
formula to calculate PED
% change in quantity demanded / % change in price
formula to calculate change in price
new - old / old x 100
what does elastic demand mean + what numbers means a product is price elastic
elastic means the product is sensitive to a change in price. more than 1 or more than -1
what does inelastic demand mean + what numbers means a product is price inelastic
product is not sensitive to a change in price. between 1 and -1
elastic demand price response
as price goes up, demand falls
factors affecting PED
availability of substitute
frequency of purchase
luxury / necessity good
what does YED stand for
income elasticity of demand
what does YED define as
The sensitivity of demand in response to a change in income
what are normal goods
goods that increase in demand as income rises
what are inferior goods
goods which demand falls as income rises
formula for YED
% change in quantity demanded / % change in income
interpretation of YED number
positive number = normal good
negative number = inferior good
factors influencing YED
luxury good
necessity good
inferior good