What is meant by the term demand ?

Demand is the number of products customers are willing and able to buy at a given price.

What is a complementary good ?

A complementary good is a good that is consumed together with another good, such as cars and petrol.

Define the term normal good .

A normal good is one for which demand increases as consumer income rises .

True or False? There is a correlation between the quantity demanded by customers and the price.

True. There is a negative correlation between the quantity of a product demanded by customers and its price.

What happens to demand for most products when prices increase ?

When prices increase, the quantity demanded decreases.

What is meant by the term non-price factors affecting demand.

Non-price factors affecting demand are factors other than price, such as changes in income or seasonality, that lead to a shift in the entire demand curve .

What is meant by the term substitute good ?

A substitute good is a replacement good , such as a different brand of car.

What happens to demand for most goods when prices decrease ?

When prices decrease , the quantity demanded increases .

Define the term inferior good .

An inferior good is one for which demand decreases as consumer income rises .

True or False? An increase in spending on advertising is likely to shift the demand curve to the left.

False . An increase in spending on advertising is likely to shift the demand curve to the right.

What is meant by the term supply ?

Supply is the number of goods/services businesses are willing to sell at a given price in a specific time period.

True or False? There is an no relationship between supply and price.

False. There is a positive correlation between supply and price.

What happens to the supply of most goods when the price increases ?

When prices increase, the quantity supplied increases.

What is meant by the term non-price factors affecting supply.

Non-price factors affecting supply are factors other than price that cause a shift of the entire supply curve , such as new technology or government subsidies,

True or False? A change in any non-price factor that leads to less supply will shift the supply curve to the left.

True. A change in any non-price factor that leads to less supply will shift the supply curve to the left.

What is meant by the term indirect tax ?

An indirect tax is one that causes an increase in the costs of production , such as value-added tax (VAT).

What happens to the supply of most goods when prices decrease ?

When the price decreases, the quantity supplied decreases.

Define the term subsidy ?

A subsidy is a form of financial assistance given to a business by the government, and it reduces the costs of production .

True or False? The introduction of automated production processes is likely to shift the supply curve to the left.

False . The introduction of automated production processes is likely to shift the supply curve to the right.

Define the term external shock .

An external shock is an unexpected event that can change the quantity of a good or service supplied.

What happens to the equilibrium price if the supply curve shifts to the left ?

If the supply curve shifts to the left, the equilibrium price increases.

A market is any place that brings buyers and sellers together to trade at an agreed price.

Define the term market equilibrium .

Market equilibrium is the point where the quantity demanded equals the quantity supplied at a specific price.

True or False? At the equilibrium price , sellers will be satisfied with the quantity of sales.

True . At the equilibrium price, sellers will be satisfied with the quantity of sales.

True or False? At the equilibrium price , buyers are satisfied that the product provides benefits worth paying for.

True . At the equilibrium price, buyers are satisfied that the product provides benefits worth paying for.

What happens if a product's selling price is set above the market equilibrium ?

If the selling price is set above the market equilibrium, supply will be greater than demand, and there will be a surplus .

What happens to the equilibrium price if the demand curve shifts to the left?

If the demand curve shifts to the left, the equilibrium price decreases.

What is the impact of a rise in demand on the market equilibrium?

A rise in demand causes the demand curve to shift to the right, leading to a new equilibrium with a higher price and quantity.

Define the term shortage .

A shortage occurs when demand exceeds supply at a given price.

What is the impact of an increase in supply on the market equilibrium?

An increase in supply causes the supply curve to shift to the right, leading to a new equilibrium with a lower price and higher quantity.

Define the term price elasticity of demand .

Price elasticity of demand is a measure of how responsive the change in quantity demanded is to a change in price.

True or False? The PED value is always negative.

True. The PED value is always negative because there is a negative correlation between price and demand.

If PED > -1 , what type of good is it?

If PED > -1, it is a price elastic good.

What happens to total revenue when the price of a price inelastic good increases?

When the price of a price inelastic good increases, total revenue increases .

Define the term price elastic demand .

Price elastic demand means that demand is more responsive to a change in price .

Define the term price inelastic demand .

Price inelastic demand means that demand is less responsive to a change in price .

If PED is between 0 and -1 , what type of good is it?

If PED is between 0 and -1 , it is a price inelastic good.

What happens to total revenue when the price of a price elastic good increases?

When the price of a price elastic good increases, total revenue decreases .

True or False? Demand for luxury goods is likely to be price elastic.

True . Demand for luxury goods is likely to be price elastic.

Define the term income elasticity of demand (YED).

Income elasticity of demand (YED) measures how responsive the change in quantity demanded is to a change in income.

If income elasticity of demand is greater than 1 , what type of good is it?

If the income elasticity of demand is greater than 1 , it is a luxury good .

If income elasticity of demand is between 0 and 1 , what type of good is it?

If income elasticity of demand is between 0 and 1 , it is a necessity good .

If income elasticity of demand is less than 0 , what type of good is it?

If income elasticity of demand is less than 0 , it is an inferior good .

Define the term normal good .

A normal good is one for which demand increases as consumer income rises .

Define the term inferior good .

An inferior good is one for which demand decreases as consumer income rises e.g. people stop buying budget cereal when income rises.

True or False? Bread, milk, eggs, and potatoes are examples of inferior goods.

False . Bread, milk, eggs, and potatoes are examples of normal goods.

What happens to demand for normal goods during a recession ?

During a recession, the demand for normal goods decreases as incomes fall e.g. people spend less on clothing as incomes fall.

What happens to the demand for inferior goods during a recession ?

During a recession, the demand for inferior goods increases as incomes fall e.g. people stop buying luxury cereals and switch to buying supermarket own brand cereals.

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1.2 Market (Edexcel A Level Business)

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What is meant by the term demand?
Demand is the number of products customers are willing and able to buy at a given price.
What is a complementary good?
A complementary good is a good that is consumed together with another good, such as cars and petrol.
Define the term normal good.
A normal good is one for which demand increases as consumer income rises.
True or False?
There is a correlation between the quantity demanded by customers and the price.
True.
There is a negative correlation between the quantity of a product demanded by customers and its price.
What happens to demand for most products when prices increase?
When prices increase, the quantity demanded decreases.
What is meant by the term non-price factors affecting demand.
Non-price factors affecting demand are factors other than price, such as changes in income or seasonality, that lead to a shift in the entire demand curve.
What is meant by the term substitute good?
A substitute good is a replacement good, such as a different brand of car.
What happens to demand for most goods when prices decrease?
When prices decrease, the quantity demanded increases.
Define the term inferior good.
An inferior good is one for which demand decreases as consumer income rises.
True or False?
An increase in spending on advertising is likely to shift the demand curve to the left.
False.
An increase in spending on advertising is likely to shift the demand curve to the right.
What is meant by the term supply?
Supply is the number of goods/services businesses are willing to sell at a given price in a specific time period.
True or False?
There is an no relationship between supply and price.
False.
There is a positive correlation between supply and price.
What happens to the supply of most goods when the price increases?
When prices increase, the quantity supplied increases.
What is meant by the term non-price factors affecting supply.
Non-price factors affecting supply are factors other than price that cause a shift of the entire supply curve, such as new technology or government subsidies,
True or False?
A change in any non-price factor that leads to less supply will shift the supply curve to the left.
True.
A change in any non-price factor that leads to less supply will shift the supply curve to the left.
What is meant by the term indirect tax?
An indirect tax is one that causes an increase in the costs of production, such as value-added tax (VAT).
What happens to the supply of most goods when prices decrease?
When the price decreases, the quantity supplied decreases.
Define the term subsidy?
A subsidy is a form of financial assistance given to a business by the government, and it reduces the costs of production.
True or False?
The introduction of automated production processes is likely to shift the supply curve to the left.
False.
The introduction of automated production processes is likely to shift the supply curve to the right.
Define the term external shock.
An external shock is an unexpected event that can change the quantity of a good or service supplied.
What happens to the equilibrium price if the supply curve shifts to the left ?
If the supply curve shifts to the left, the equilibrium price increases.
What is a market?
A market is any place that brings buyers and sellers together to trade at an agreed price.
Define the term market equilibrium.
Market equilibrium is the point where the quantity demanded equals the quantity supplied at a specific price.
True or False?
At the equilibrium price, sellers will be satisfied with the quantity of sales.
True.
At the equilibrium price, sellers will be satisfied with the quantity of sales.
True or False?
At the equilibrium price, buyers are satisfied that the product provides benefits worth paying for.
True.
At the equilibrium price, buyers are satisfied that the product provides benefits worth paying for.
What happens if a product's selling price is set above the market equilibrium?
If the selling price is set above the market equilibrium, supply will be greater than demand, and there will be a surplus.
What happens to the equilibrium price if the demand curve shifts to the left?
If the demand curve shifts to the left, the equilibrium price decreases.
What is the impact of a rise in demand on the market equilibrium?
A rise in demand causes the demand curve to shift to the right, leading to a new equilibrium with a higher price and quantity.
Define the term shortage.
A shortage occurs when demand exceeds supply at a given price.
What is the impact of an increase in supply on the market equilibrium?
An increase in supply causes the supply curve to shift to the right, leading to a new equilibrium with a lower price and higher quantity.
Define the term price elasticity of demand.
Price elasticity of demand is a measure of how responsive the change in quantity demanded is to a change in price.
True or False?
The PED value is always negative.
True.
The PED value is always negative because there is a negative correlation between price and demand.
If PED > -1, what type of good is it?
If PED > -1, it is a price elastic good.
What happens to total revenue when the price of a price inelastic good increases?
When the price of a price inelastic good increases, total revenue increases.
Define the term price elastic demand.
Price elastic demand means that demand is more responsive to a change in price.
State the formula for calculating the price elasticity of demand (PED).
Formula.
$PED = \frac{% change in quantity demanded}{% change in price}$
Define the term price inelastic demand.
Price inelastic demand means that demand is less responsive to a change in price.
If PED is between 0 and -1, what type of good is it?
If PED is between 0 and -1, it is a price inelastic good.
What happens to total revenue when the price of a price elastic good increases?
When the price of a price elastic good increases, total revenue decreases.
True or False?
Demand for luxury goods is likely to be price elastic.
True.
Demand for luxury goods is likely to be price elastic.
Define the term income elasticity of demand (YED).
Income elasticity of demand (YED) measures how responsive the change in quantity demanded is to a change in income.
State the formula to calculate income elasticity of demand (YED).
Formula.
$Income elasticity of demand = \frac{% change in quantity demanded}{% change in income}$
If income elasticity of demand is greater than 1, what type of good is it?
If the income elasticity of demand is greater than 1, it is a luxury good.
If income elasticity of demand is between 0 and 1, what type of good is it?
If income elasticity of demand is between 0 and 1, it is a necessity good.
If income elasticity of demand is less than 0, what type of good is it?
If income elasticity of demand is less than 0, it is an inferior good.
Define the term normal good.
A normal good is one for which demand increases as consumer income rises.
Define the term inferior good.
An inferior good is one for which demand decreases as consumer income rises e.g. people stop buying budget cereal when income rises.
True or False?
Bread, milk, eggs, and potatoes are examples of inferior goods.
False.
Bread, milk, eggs, and potatoes are examples of normal goods.
What happens to demand for normal goods during a recession?
During a recession, the demand for normal goods decreases as incomes fall e.g. people spend less on clothing as incomes fall.
What happens to the demand for inferior goods during a recession?
During a recession, the demand for inferior goods increases as incomes fall e.g. people stop buying luxury cereals and switch to buying supermarket own brand cereals.

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