A place where buyers and sellers interact with the purpose of exchanging goods and services
Perfect competition
Manysellers selling identicalproducts e.g. Farmers'Markets
Imperfect competition
Many sellers selling similar products e.g. Cosmetic market
Monopoly
Only oneseller of goods and services so there is nocompetition e.g. Irish Rail
Assumptions about consumers
All consumers' income is limited
A consumer will act in a way that is Rational
Consumers aim to maximise their utility (satisfaction)
The more they consume of a product, a point will be reached where they no longer get the same level of satisfaction (law of diminishing marginal utility)
Law of demand
Defines the relationship between price and quantity
Reasons why demand curve shifts to the right
Consumer's incomeincreases so they can buy more
Price of a substitutegoodincreases (e.g. Borny's Teal increases so quantity demanded of Lyon's Tea increases)
Decrease in the price of a complementarygood (e.g. shoes cause an increase in the quantity demanded of shoelaces)
Consumer's preferences change
Consumers expect the product or service to be more expensive in the future
Unplannedfactors (e.g. goodweatherincreasesdemand for icecream)
Demand curve shifts to the right
increase in demand, price remains the same
Demand curve shifts to the left
decrease in demand, price remains the same
Reasons why a demand curve shifts to the left
Consumers income decreases to they buy less
Price of a substitute good decreases so consumers buy the substitute good instead
Price of a complementary good increases
As consumer preferences change they may demand less
If consumers expect prices to be lower in the future they will but less now
Unplanned factors - e.g. bad weather causes decrease in demand for outdoor events
The law of supply states that there is a positive relationship between the price of a good and the quantity supplied of that good
as price rises so does quantity supplied
as price falls so does quantity supplied
Supply curve shifts to the right
increase in supply, price remains the same
Supply curve shifts to the left
decrease in supply, price remains the same
Reasons why a supply curve shifts to the right
Cost of production decreases so it is more profitable for the seller
New technology can lead to products being quicker and cheaper to produce
Unplanned factors - e.g. good weather may cause crops to grow faster so farmers sell more
Reasons why a supply curve shifts to the left
Cost of production increases so the good is less profitable and the supplier will supply less of it
The initial price of new technology is very high and so will decrease sellers profits
Unplanned factors - bad weather may cause crops to not grow so the farmer will sell less
Equilibrium is the point on the graph where the demand curve meets the supply curve. At this point we can determine equilibrium price and equilibrium quantity
When demand is greater than supply a shortage occurs and prices rise
When supply is greater than demand a surplus occurs and prices fall