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The Market

Markets

  • 6 things to know
  • Paper 1 and Paper 3

Overview

The laws of demand and supply and the shape of each curve, equilibrium price, surpluses and shortages, what happens to price and quantity when either curve shifts, and the factors that shift demand and supply rather than moving along them.

What you need to know

Answer each one before you reveal it.

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Key term

Define a market, the law of demand and the law of supply.

Process

What is the equilibrium price, and what happens above it?

Process

What happens to equilibrium when supply or demand shifts?

Process

Distinguish a movement along the supply curve from a shift of it.

Process

How does a change in population size affect the demand curve?

Key term

On a standard supply and demand diagram, what does the vertical axis represent?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is a market in economic terms?

    Model answer

    A market is where buyers and sellers come together to exchange goods or services, with prices determined through their interactions.

  2. 2

    Define demand.

    Model answer

    Demand refers to the quantity of a product that consumers are willing and able to purchase at various price levels over a given time period.

  3. 3

    Define supply.

    Model answer

    Supply refers to the quantity of a product that producers are willing and able to offer for sale at various price levels over a given time period.

  4. 4

    State the law of demand.

    Model answer

    As price increases, quantity demanded falls, and as price decreases, quantity demanded rises, assuming other factors remain constant.

  5. 5

    State the law of supply.

    Model answer

    As price increases, quantity supplied rises, and as price decreases, quantity supplied falls, assuming other factors remain constant.

  6. 6

    Describe the shape and direction of a demand curve.

    Model answer

    A demand curve slopes downward from left to right, showing the inverse relationship between price and quantity demanded.

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Meeting Customer Needs
The Market
Marketing Mix and Strategy
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Net gain = − initial cost.
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AGross profit equals revenue minus cost of sales.
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CNet profit equals operating profit minus interest and taxation.

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