business marketing 1.2

• demand


  the amount of a product consumers are willing and able to purchase at a given price. Demand affects the attractiveness of the market and the potential for sales.
• Demand curve


  a graph of the relationship between the price of a good and the quantity demanded

  
• What factors affect demand?

  -Price of complementary products

  -price of substitutes

  -seasonality

  -external shocks

  -demographics

  -advertising and branding

  -Fashion tastes and preferences

  -Chnages in the incomes of consumers
• on what occasion will a demand curve shift to the right and left


  the demand curve will shift when any other factors but price is affecting it.

  For example incomes, if people get a better income they will be able to buy more thus demand increases and shifts to the right . but if incomes decrease demand will decrease and thus shift left.
• supply


  the amount of a product that suppliers are will offer to the market at a. given price. the higher the price of a particular good or service the more products will be supplied to that market. supply is directly influenced by how accessible and profitable a market his for suppliers.
• supply curve


  a graph of the relationship between the price of a good and the quantity supplied. As price goes up so does quantity supplied.

  
• What factors affect supply?

  -changes in cost of production (cause shifts left or right)

  -new technology (right)

  -external shocks e.g wars (left) and weather (left/right)

  -Indirect taxes (both)

  -government subsides (right)
• on what occasion will a supply curve shift

  a supply curve will shift when affected by any other factors other than price.
• equilibrium (clearing price)


  where supply and demand meet. if we move out of equilibrium we either get surplus supply (too much was supplied) or excess demand (too little was supplied)

  
• Why do all markets eventually find their equilibrium price?

  because market forces are always pushing the prices to the equilibrium for example if you have excess demand the prices will go up as some customers will always pay a little more for a goof that is in short supply.,
• price elasticity of demand

  the responsiveness of the quantity demanded to a change in price
• Price elasticity


  means that whether there is an increase in or decrease in price it affects the demand for the product heavily. for example if there is a increase in price demand decreases more.
• Price inelastic


  when price increases or decreases demand for this product hardly changes.
• how to calculate PED


  % changes in quantity demanded

  ------------------------------------- = PED

  % change in price

  
  

  above 1 = price elastic

  Below 1 = Price inelastic
• factors that influence PED

  - Number of substitutes

  -relative effort/Costs of switching to another product

  - extent of which product is considered a necessity

  - perceived value of the brand

  -time on the market

  -percentage of income spent on the product
• Income elasticity of demand

  The responsiveness of demand to a change in income
• income elastic


  the percentage change in incomes would lead to a greater percentage change in quantity demanded. these are often goods such as inferior or superior.
• income inelastic


  percentage change in incomes will lead to a lower change in quantity demanded. in other words it doesn't really affect it. These are goods such as necessities.
• How to calculate YED


  % change In quantity demanded

  ------------------------------------ = YED

  % change in peoples incomes

  
  

  greater than 1: income elastic

  less than 1 : inelastic
• factors influencing YED


  - whether the product is considered a nessecity

  - whether a product is considered a luxury