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1.2 How markets work - Coggle Diagram
1.2 How markets work
DEMAND
Demand is the quantity of goods or services that consumers have the willingness and ability to buy it over any period of time.
shifts in the demand curve- a movement of the whole demand curve to the right or left of the original caused by a change in any variable affecting demand except price, it is effected by:
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diminishing marginal utility- the value,or utility, that individual consumers gain from the last product consumed falls greater the number consumed.
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PED
the proportionate response of changes in quantity demanded to a proportionate change in price, measured by % change in quantity/ %change in price
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factors affecting PED
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the cost of switching between products- there may be significant costs involved, demand tends to be relatively inelastic.
the degree of necessity- necessities tend to have inelastic demand whereas luxuries tend to have a more elastic demand
PED and total revenue- PED and changes in total revenue of a product are linked. Total revenue= quantity sold x price