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1.2.2/5 DEMAND and SUPPLY - Coggle Diagram
1.2.2/5 DEMAND and SUPPLY
why a demand curve is downward sloping
price and demand have an inverse relationship
as prices increase, demand decreases
as quantity of consumption rises, the perceived utility drops
consumers are only willing to pay less than before
factors that cause a demand curve shift to the right
INCOME (DISPOSABLE)
normal goods
as income rises, demand falls
inferior goods
as incomes rise, demand rises
SUBSTITUTES
rival/competition goods are cheaper or more expensive
ADVERTISING
affects our willingness to buy
POPULATION
more people = more demand // less people = less demand
FASHION/TASTES
herd mentality
movement along a demand curve
extension
when prices fall
contraction
when prices rise
why the supply curve is upward sloping
an increase in supply leads to a shift right
at a given price, more of the goods/services is supplied
factors that cause a shift right
costs rise as production rises
higher prices to cover costs of production
new entrants
higher prices attract new firms into the market
competition
profit motive
higher prices create a greater profit motive