Further+notes+on+the+market+mechanism

=Chapter 7 covers the material in terms of Supply and Demand analysis. = = = =The market mechanism allocates resources through the price mechanism. But how are prices themselves determined? This is through the interaction of supply and demand. =

=Key Terms = A market is where there are buyers and sellers to exchange goods or services Demand: the quantity of a good or service that buyers (consumers) are willing and able to purchase at each price over a given time period Supply: the quantity of a good or service that sellers (firms) are willing and able to sell at each price, over a given period of time.

= = =Market Equilibrium price: The price where there is no excess demand or excess supply or the price at which quantity supplied=quantity demanded. The price where there is no excess demand or excess supply. =

Student Activity: Using the graph answer the following questions: 1. What is happening to the price of petrol over time. 2. Using Supply and Demand analysis outline possible reasons for petrol price changes. 

Population and Demand: Do not be vague in explaining how population changes can effect demand for something. Be explicit. Do you think that population changes could have led to the 30% increase in the price of oil between 2009 and 20013? Although the world's population is increasing it is not a rapid change so unlikely to effect prices in the short term. Also it is more demographic changes such as changes in the[| dependency ratio that alter the structure of demand].

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<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;"> =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Online crossword exercise] = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Revision notes = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Supply Curve] = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Changes (shifts) in supply] = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Taxes, subsidies and the supply curve] =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Demand Curve] = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Changes in price and demand] = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Changes (shifts) in demand] =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Price equilibrium and disequilibrium] =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">[|Past Exam Questions on Supply and Demand] =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Price Elasticity of Demand (PED) = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Price Elasticity of Supply =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Student task: =

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">. Read the extract below before answering the questions which follow:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Playdisk Ltd produces children's CD Rom games, which are priced at £30 each and which run on personal computer. The demand for home PCs has increased by 20% over the last 2 years as computer prices have fallen by 10% and as unemployment has fallen. At the same time the demand for Playdisk's games has increased by 25%.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">(a) Why has a fall in unemployment led to an increase in the demand for home PCs? [2] <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">(b) Calculate the price elasticity of demand for home PCs. [2] <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Name two factors, apart from those mentioned in the case study, which could cause a change in the demand for Playdisk's games.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">End of Unit Open Book Test. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">