Notesale: Turn your study into money

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Topic 1
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Factors Affecting Demand
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Substitutes – the demand for a particular brand or product type can be affected by
a price change of a substitute (a product that replaces another)
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g
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if the price of the printers were to increase, the demand for printers might
fall, and so the demand for ink cartridges could fall too
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Fashion, consumer tastes and consumer preferences – demand for a product
relies on what consumers want
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g
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Advertising and branding - increase demand for a product or encourage existing
consumers to be loyal to the product or brand and repeatedly buy the product to stop
demand falling
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E
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advances in healthcare mean that people are living longer
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Seasonal changes – demand for goods and services can changes throughout the
year
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g
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External shocks - this include the threat of war, diseases, and extreme weather
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g
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Supply
The quantity of a product that suppliers are willing and able to supply
to a market at a given price, at a particular time
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PRICE ELASTICITY OF DEMAND = % CHANGE IN
QUANTITY DEMANDED/ % CHANGE IN PRICE

PRICE INCREASE

PRICE
DECREASE

PRICE ELASTIC

PRICE INELASTIC

Leads to a big %
decrease in quantity
demanded
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Revenue
rises

Leads to a small %
decrease in quantity
demanded
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Relative effort/costs of switching to another product
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Perceived value of the brand
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 Percentage of income spent on the product
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Indirect taxes - The government can influence supply by changing taxation where if
the tax on a good or service increases, then this effectively increases the costs for
the producer and they are likely to reduce their supply
Subsidies - a subsidy is money given to a business by the government to help it with
its costs and encourage it to produce more of a particular product
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Lower costs would mean that a firm would be willing and able to
increase the supply of its good or service
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External shocks - this includes shocks such as war, which can affect supply
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 Whether the product is considered a luxury
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For
example, the YED of a chocolate bar is relatively
inelastic as it costs a small percentage of most
people’s income
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Goods that have income elastic demand include
cars, TVs, and clothing
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These products
might be considered necessities, such as some food types
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Normal
goods have a positive income elasticity of demand
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A decrease in incomes will lead to an
increase in demand
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Remember
Shift in Demand Curve

Shift in Supply Curve
PED
>1 (Highly Price Elastic)

Key Words

Income Elasticity of Demand
The relationship between a change in income and
the change in demand for a product
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 A fall in demand= Shift to
the left
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 A fall in income= Shift to
the left

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