1.2

• List the 7 factors that cause a change in demand

  • External shock
  • Changes in consumer’s disposable incomes
  • Trends
  • Seasonality
  • Demographics
  • Price of substitutes and complementary goods
  • Advertising
• List the 5 factors that cause a change in supply

  • External shock
  • Changes in technology
  • Changes in the cost of production
  • Indirect taxes & Government subsidies
• Write the formula for PeD


  (% Change in demand)/(% Change in price)
• Explain why PeD is always negative

  Price and demand have a negative correlation
• Explain what the PeD numbers mean

  • =0, perfectly inelastic
  • <1, inelastic
  • >1, elastic
• Write down the factors that influence PeD

  • Availability of substitutes
  • Habitual behaviour (brand loyalty)
  • Luxury or Necessity
• Write down the formula for YED

  (% change in demand)/(% change in income)
• Explain what the YED numbers mean

  • <0, inferior
  • <1, necessity
  • >1, luxury
• Write the factors that influence YED

  • Economic changes (business cycle)
  • Income changes
  • Type of good