Economics revision on everything


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Economics revision on everything

  1. 1. Demand 0 : Is the quantity of a product that consumers are willing and able to purchase at various prices at various amounts of time. 0 Demand for a good will rise or fall depending on different factors such as the price of other goods or the taste of the public depending on if your product is elastic or inelastic. 0 A market exists wherever there are buyers and sellers of a particular good. Buyers demand goods from the market whereas sellers supply goods to the market.
  2. 2. Determinants of Demand 0 Advertising levels - the greater the advertising the more people will view the product and the more demand will rise. 0 Taste- if a clothing market, or what is the ‘cool’ thing to have. Also is the clothing seasonal or an all year round item. 0 Income levels- when consumers have greater disposable income they will buy the products they want but were perhaps too expensive before.
  3. 3. Demand Curve They shift left or right when there is a change in income, price and availability of substitutes, tastes and preferences. Price A shift left in the demand curve from D2 to D3 as there has become a decrease in demand D3 D2 Quantity
  4. 4. Consumer Surplus Consumer surplus- the difference between what the consumer is willing to pay and what they actually pay for a product or service
  5. 5. Price and Consumer surplus
  6. 6. Some key terms: The Demand Curve:- the line on a price quantity diagram which shows the level of any effective demand at any given price. Individual Demand curve:- the demand curve for an individual consumer or firm etc. Market demand curve:- the sum of all individual demand curves. Consumer Surplus:- the difference between how much buyers are prepared to pay for a good and what they actually pay. If there was less of the product consumers would be willing to pay more for the product expressing the law of demand.
  7. 7. Supply 0 Supply is defined as the quantity of goods that sellers are willing to sell at multiple prices over a period of time. 0 Supply and Price: If the price of a good increases, assuming no other factors change, they are likely to expand production to take advantage of the higher prices and the higher profits they can make. 0 Quantity supply will rise if the price of the good rises if all other things are equal.
  8. 8. Supply Curve 0 A Supply curve shows the quantity that will be supplied over a period of time at any given price. 0 A rise in price will lead to a rise in quantity supplied, a fall in price will lead to a fall in quantity supplied. - An upward sloping curve assumes. 0 Firms are motivated to produce by profit. 0 The cost of producing a unit increases as output increases.
  9. 9. Determinants of Supply The price of other goods. Changes in the price of other goods can affect supply. 0 Cost of production: If the cost of production rises at any given point of output. Firms will raise prices to try and cancel out this increase in production cost. 0 If they cant charge higher then profits will fall. 0 A rise in the cost of production leads to a fall in supply. 0 Technology: If new technology is introduced into the production process it should lead to a fall in the cost of production due to greater product efficiency. This means it will encourage more firms to supply more. 0 0 Expectations of future events: if firms expect future prices to be much higher, they may restrict supply 0
  10. 10. Producer Surplus. The difference between the market price what the firm receives and the price at which it is prepared to supply at . Price Quantity
  11. 11. Shifts in supply – A shift to left will mean a reduction in supply, a shift to the right will show an increase in supply
  12. 12. The law of diminishing returns 0 The more of the variable factor of production is added to a fixed gap, the smaller the output increase will be.
  13. 13. Market Equilibrium 0 The equilibrium is set where the demand of a good or service equals the supply. 0 Changes in supply and demand levels will result in a new equilibrium price being set. 0 A change in demand will lead to a shift in the demand curve, a movement along the supply curve and a new equilibrium price and visa versa for supply a shift in supply curve. 0 The equilibrium price is not necessarily the price, which will lead to the greatest economic efficiency.
  14. 14. Excess supply and demand 0 Surplus: A situation in which quantity supplied is greater than quantity demanded. EXCESS SUPPLY 0 Shortage: A situation in which quantity demanded is greater than quantity supplied. EXCESS DEMAND
  15. 15. Market Equilibrium Point
  16. 16. Consumer and prodder surplus 0 Consumer surplus:- the difference between how much buyers are prepared to pay for a good or service and how much they actually pay 0 Producer surplus is the difference between the market price at which firms receive and the price at which they are prepared to supply .
  17. 17. 0 An equilibrium price- the price at which there is no tendency to change because planned sales are equal to planned purchases. 0 0 Market clearing prices:- the price at which there is neither excess demand nor excess supply but where everything offered for sale is purchased. 0 0
  18. 18. Key terms 0 Complements:- in joint demand, in one demanding good, a consumer will also be likely to demand another good- e.g .tennis racket and tennis balls, strawberries and cream. 0 Substitutes – a good, which can be replaced by another good. E.g. PEPSI AND COLA. Many goods are demanded only because they are needed for the production of other goods. This is known as derived demand. Composite demand:- when a good Is demanded for two or more distinct uses. In commercial transport, roads are in composite demand with commercial. Joint supply:- is where two goods are together when one good is supplied for two different purposes.