Our comprehensive summary sheet on demand and supply curves is just what you need to ace your exams! Dive deep into the intricacies of market forces, equilibrium, and the factors that drive demand and supply. With clear explanations and visual examples, our summary sheet will help you master this f...
DEMAND
2-2 5 LUXURY INCOME ELASTICITY OF DEMAND WHAT Ability
SUPPLY
and
.
·
Business travel
-
willingness to
demand to change on income
responsiveness good/service at particular
↳ of
croide a a
· Fine
wine-dining I in time
at moment
price a
given
·
Exclusive resorts
chocolates
MED SIGNIFICANCE
income
quantily demanded predict
·
% A in ↳ firs
helps
RATIONAL DECISION WHAT ?
MAKING INFERIOR % A in
effect of economic
cycle
an
on sales Supply CURVES
MakeChoiceswiththeaimofmaximizing ability and willingness
↳ ily
to ↳ .
Cigarettes NUMERICAL VALUE Drawn Paribus
at
I >
-
cheris
assuming
buy particular good
ownabedewons
So .
Inferior
mayhavean empat a s
O
limited budget a YED
o is
↳
20
ASSUMPTIONS and at oa
n
↳ Businesses are
responding to
consumers choose independently
-Model > challenged
- a
given price a
travel
↳ ↑ in income > -
↓ in demand
↳
by the use of time market price signals when
given NORMAL LUXUR
Nomal goodYEDO
↳ Fixed + consistent task/preferences · oT
↳
Gather complete info on the alternatives
behavioural
economics
↳ Income elastic (exceeds + 17 making output decisions
↳
Always make optimal
choice
DERIVED DEMAND LAW Of DEMAND ↳ ↑ income => proportion spent on
product ↑ >
-
Why positive relationship
usually inverse relationair
·
Luxury good YED > 1
↳ Dermotretmarketpic
↳
Maximo Unity ↳for To
D
no Magnahi
is NORMAL
O
NECESSITY du demanis
pro Between Price demn
another
As
& ↳
Type of normal good ↳ income
service
good
Necessity YEDSO
extension of · and 1 elasticity
-coste
< ↳
demand I but + income ↳ expansion =>
↳ New entrants
DIMINISHING My Unit As price => contraction Milk fruits
SHIFTS IN SUPPLY
,
demand businesses
CROSS PRICE ELASTICITY
of -
↑ prices
- MU of extra OF DEMAND enter market >
-
in total supply
units I as more is
consumed
& Ceter's Paribus ↳ responsiveness
change
in price
of demand for
of another .
one
product
producer (1) so the
CAUSES
↳
Demand curve = futons except
all one SUBSTITUTES
XED -
Changes in production costs
~
are constant
↳ Positive XED
DEMAND
o
demanded > ↓ cost of D at price
CURVE % A in
quantity supply more
>
27
e
↳ Investe relationship
FACTORS
Own price
AFFECTING DEMAND
MOVEMENT
a in price
% of B
Xe Pric -
T
↳
↳
↑
fall
cost
in
> price of
exchange rate
new
>
-
materials
↑ prices of
, wages
M-> ↓ supply
Changes rechnology
over
price 2 demand
in
-
↳
for substitute
period or time
Income COMPETITIVE SUPPLY
COMPLEMENTSA XED
↳ ↑ supply ↓ for consumers
Substitutionis rano XED <-
smong complimentary with ↓
↓
relationship a business could make ↑ costop I simply cost a production
↑ real for good - o
cheaper a
tavourable weather
income a alternative a
thanthe adition UNRELATED GOODS
itsFor food supply
①
↳ bumper harvest ↑ supply
changedinProaimpact
t the >
-
>
-
cost of
Av
XED O
↳
biofuel
↳
I =
switching :
price a ↳
quantily inversey
related
impact
globalfood
~
Enky of new products
↓ pressure on price
PRICE supply ↑
↳
ELASTICITY OF DEMAND
>
-
CAUSES SHIFTS SIGNIFICANCE OF XED Er
burness
a
Of
JOINT SUPPLY
do se
highe
If wants
.
seek
Increase in demand > -
measure the responsiveness of ↳ firs aware of competition supply ↑=> curre will shift
Decrease in demand Elastic
quanting demanded
variables/anectochangeso in a H
↳ for
f in one
good >
-
< how price changes ty
-
of other goods
I COEFFICIENT OF
,
Joint
by-product
own price price
changing price by relatively 2 other time will impact them ↑ ord of
,
·
of a substitute
demand
real income ↳ in supply
SES
responsiveC& as
&
·
changing price of complements
m Lamb and wool
fish a chips
business may want to Ex
·
↳
" re a l income SED
I
·
companotradaemar
Inelastic Bundle them PES) + 1 Price Elastic
a
"distribution of income
ELASTICITY
·
demand OF SUPPLY
quantity
in
·
Effects of
advertising marketing
+ s
↳
relatively % 1 in PES1/Price Inelastic
Interest rates
unresponsive (PES) relationship
·
↳ => measures the
· seasonal factors
1I goods with X demand curves coefficient ofDED between hange in quantily supplied and a
PES =
0 Perfectly Inelastic
=>
reg
-
COEFFICIENT OF PED change in market price
FACTORS INFLUENCING PED ↳ Price elastic =>
producers can increase their output PES = & Perfectly Elastic
PED =
O Perfectly INELASTIC
↳ demand X change
without a rise in cost or a time
delay
when price changes ↳ No of close substitutes available for consumers Price inelastic firms find it hard to change their
PED > 1 ELASTIC ↳ ↳ ->
quartily demanded price elastic time period
-: Demand responsive large more close substitute > more production in a given
-
than price ↳
changes by a
PEDT 1 INELASTIC
↳ price of product in relation to total income
5
-
"I
↳
Demand => unresponsive small% than price PES
:
elastic % A in quantity supplied
PED Perfully ↳% of budget high => demand + price sensitive > price
ELAST
->
=& u
in
price quantily - ↳ cost of substituting % A in price
PED = 1 Unit ELASTIC ↳ demand responsive to price ↳ ↑ cost > -
price inelastic
u
change in price > no effect on output my Brand FACTORS THAT EFFECT DES
loyalty
/
=
habit
demand unresponsive to price
↳
inelastic
↳ >
-
price elastic
adverts
peran ->
price
↳
Degree necessity/ luxury 1 Spare production capacity :
PED
of
.
and Total Revenue &
I
outputwithout
elastic in
cost
↳
price inelastic >
optional spend
i
-
response
↳
Pear and
of-peak &
change in demand
Elastic
↳↓ in price => ↑ In revenue
inclassic
+
elastic
.
2
Stocks of
>
-
finishea
able to
Products and components :
respond to a change in demand
SIGNIFICANCE OF PED ↳ Supply will be elastic
Inelastic Used to predict : Fase and cost of factor
. L
3 substitution/factor mobility :
↓ in price > ↓ in revenue
capar
and Labour anoccupationally
↳ If the elastic
↳ effect of a change on price on total mobo ,
to
o
elastic
Unitary
revenue of sellers be mobilised
↳
higher as resources can
to supply extra output
A in price X affect
↳
effect of a change in indirect tax
an
.
4 Time period
↳ revenue
price and quartily demanded
a production speed :
supplymorepatictheaa
on longer
27
The Short-run
Perfectly
↳ Price discrimination a
Inclastic He
.
↳ diff prices for same product one factor of Production luls
.
↳ production
is fixed
↳ ↑ price
PES - relatively inelastic
↳ A aim to charge => consumers whose
The
in
price same revenue
demand is
Price
.
b
↳ ALL
long-nen
faction production
of are variable
change inelastic
PES-
> relatively elastic
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