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Summary Business Edexcel Section 1.2Comprehensive notes
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Lesson summaries notes including definitions, theory, pictures for clear understanding. PED focused
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1.2 Market1.2.1 - Demand
Factors leading to a change in demand
Demand: The amount of good that consumers are willing and able to buy at a given price.
Factors leading to change in demand are:
Price of substitutes: People can buy cheaper substitutes. Eg. Sugar types
Price of compliments: Items that come with the product. Eg. Charger & iPhone, forks & knives
Alternative brands: Other brands of same product
Change in consumer incomes: if consuemers have more money, likely to buy at more expensive
places. Eg. New look over primark.
Marketing, advertising and branding: memorable adverts/ offers/ events - heavily influenced results
in more demand. Eg. Monopoly mcdonalds, harribos advert and cilit bang advert
Population structure/demographics: categories of people tend to share needs and wants. Eg. Baby
boom (increase in amount of babies born.) Uk population getting older.
Time of year: Eg. Pumpkins at Halloween
Weather and climate: Eg. Coats in winter (cold)
External shocks: Something that happends outside of the business/ country, a business has no
control over it. Eg. Coronavirus, tsunami, petrol crisis.
1.2.2 - Supply
Factors leading to a change in supply
Supply: the quantity of a good or service that a producer is willing and able to make available on the
market at a given rice, over a given period of time. It is what the business gives and sells.
Factors leading to change in supply are:
Price: as price increases, a business will want to supply more, in anticipation of higher profits.
Cost of production: Can increase due to cost of materials or a rise in minimum wage. Less cost for
capital intensive production. Business may decide to produce less or increase price.
Indirect taxes: When government increase tax on goods such as petrol, supply will decrease. VAT,
customs tax, excise tax are all indirect taxes and when applied to goods, it makes supplying them
less attracitive. This can lead to a decrease in supply Eg. VAT
Government Subsidies: money given by government to encourage more suppliers to enter the
market and to supply more - this increases supply. Eg. Electric chargers for car, solar panels
External shocks: Events that happen outside of business and its control an businesses may not want
to supply at current levels. Eg. Changes in oil price: can affect transport costs, bad weather: ruins
crops, war: can prevent supplying to that country.
, 1.2 Market
1.2.3 – Markets
The interaction of supply and demand
Price up = demand down
If businesses costs increase, they try to absorb costs so customers don’t have to pay more. Eg.
McDonalds
The drawing and interpretation of supply and demand diagrams to show the causes and
consequences of price changes
This is what the Demand and Supply curve each look like on a graph
along with the axis of price on the y axis and quantity on the x axis.
Demand curve shows how the price affects the quantity demanded.
As price increases, demand decreases or contrastingly as price
decreases, demand increases.
Supply curve shows how the higher the demand, higher they can
raise the price.
The demand and supply curve link at a point of demand which they
can supply at which also is a good price?
Demand curve – Price Supply curve – Price
These curves depend on the factor of price only. They can only ha a movement up or down the line.
Supply curve – Non price
This supply curve depends on non-price factors like time of year,
external shocks, demographics, weather and climate, etc. There is
no movement up and down lines but a shift of the entire line itself.
For example, if there was a war (external shock), the supply would
be limited and therefore the supply line shifts to the left. This means
that the price increases and on top of all that, demand increases too
Demand works similarly in the opposite way, for example it is winter
(time of year) so demand for coats increase, therefore price
increases and supply increases and they all meet at a point.
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