1.2 the market

what is demand

amount of a good that consumers are willing and able to buy at a given price

what two factors effect demand

price and non price

whats the link between price and non price

customers love a bargain and as the price is reduced the amount demanded will increase (and vice versa)

what are non price determinds of demand

price of substitutes

changes in consumer income

external shocks

time of year

supply and cost link

if production costs increase then the amount of goods produced (supplied) may decrease 

factors leading to change in supply

external shocks

indirect tax

new technology

what i the point where supply meets demand on the supply and demand graph called

equalibrum, market clearing price

what happens when demand exceeds supply

shortage

PED calculation

% change quantity demanded/ % change in price

whats does PED show

finding out if customers will switch to alternative products if prices rise

whats price elastic

less 1

if price of product rises too high then customers shop around

whats price inelastic

more than 1

demand levels dont change

whats YED

income elasticity of demand

effect on demand of a change in consumer income

what are the three types of goods in YED

inferiour goods (negative)

normal goods (0-1)

luxury goods (more than 1)

what is YED formula

% change quantity demanded / % change consumer income

% change formula

new - old/ old x100