9609 · 3.1.2
Demand and supply flashcards
Revision flashcards for Cambridge 9609 Demand and supply (syllabus 3.1.2). Flip, recall, then mark a real past-paper question.
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Law of demand?
As price falls, quantity demanded rises (ceteris paribus).
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Demand shift vs movement along curve?
Shift = non-price factor changes; movement = price change only.
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Demand increase causes?
Higher income, favourable tastes, rise in substitute price, effective advertising.
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Supply increase causes?
Lower costs, better technology, more producers, subsidies.
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Market surplus?
Quantity supplied > quantity demanded at current price → downward pressure on price.
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Market shortage?
Quantity demanded > quantity supplied → upward pressure on price.
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Marketing effect on demand?
Advertising and branding can increase demand at each price — demand curve shifts right.
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Link to 8.1 elasticity?
Elasticity measures responsiveness of demand to price changes.
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Ceteris Paribus
A Latin phrase meaning 'all other things being equal'. It is the assumption that all other factors are held constant when analysing the relationship between two variables, such as price and quantity demanded.
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Substitute Good
A product that can be used in place of another to satisfy a similar want. An increase in the price of one good will lead to an increase in demand for its substitute (e.g., tea and coffee).
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Complementary Good
A product that is consumed jointly with another. An increase in the price of one good will lead to a decrease in demand for its complement (e.g., smartphones and phone cases).
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Market Equilibrium
The state where quantity demanded equals quantity supplied. At this point, the market price is stable as there is no excess demand or excess supply.
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Excess Demand (Shortage)
A situation where the quantity demanded for a product exceeds the quantity supplied at a given price. This occurs when the price is set below the market equilibrium and puts upward pressure on price.
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What is the effect of a government subsidy on the supply curve?
A subsidy reduces production costs for firms, leading to an increase in supply. This is shown by a rightward or downward shift of the supply curve, resulting in a lower equilibrium price and a higher equilibrium quantity.
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How does an increase in population affect the demand for a normal good?
An increase in population leads to a larger number of potential consumers in the market. This causes an increase in demand, shifting the demand curve to the right.