EMS THEORY EXAM 12 JUNE
PRICE THEORY (Supply & Demand)
KEYWORDS
Law of Demand Number /Amount of something
Profit Difference between total income & total
expenditure of income exceeds expenditure
Point of balance/equilibrium Point where supply & demand intersect
Cateris-paribus All other things the same
Supply Quantity of product or service which produces
is prepared to offer at specific price.
Inversely related One part goes up other part goes down
LAW OF DEMAND
• Consumers – buy more of product when price drops and less when price rises.
• Lower the price – higher the demand for the product or service.
• Higher the price – lower the demand for product or service.
• Law states – demand for products & services is inversely related. Meaning –
as one part goes up (price) other part (demand) goes down.
TWO TYPES OF DEMANDS
Individual Demand Quantity of goods & services a person prepared to buy
at given price
Market Demand Total quantity – goods & services purchased by entire
market at given price
FACTORS AFFECTING DEMAND:
Change in Income Consumer income increase – so does their purchasing
Change in Fashion changes – interest of consumers change + their
tendency/fashion purchasing habits
Advertisements Good publicity – influence consumer demand
DEMAND SCHEDULE:
• Table – indicates cateris-paribus – quantity of goods / services demanded
during given period @ different prices.
Market demand for bread
Price Quantity demanded
R2.00 10
R4.00 8
R6,00 6
3 Matters indicated in schedule:
1. Law of Demand: Price rises, quantity demand drops.
2. Quantity Demand: When price is cheaper, consumer purchases more
1
, 3. Demand: Demand present in quantity demand column.
Graphic representation of demand curve:
Demand
Price
D
Quantity
• Demand Curve – indicates ratio between price + quantity demand.
• Curve – declines from left to right
• Negative decline – result of inverse ration between price & quantity
demanded.
Change in demand:
• Level of consumer income rises – enable consumers to purchase more
goods/services resulting in rise of demand for products & services.
Price
D2
D
D3
Quantity
Rise in demand for goods/services occurs due to:
1. Rise in consumer income
2. Rise in size of population
3. Climate change
Decline in demand for goods/services
1. Decline in consumer income
2. Decline size of population
3. Change in consumer market
2
PRICE THEORY (Supply & Demand)
KEYWORDS
Law of Demand Number /Amount of something
Profit Difference between total income & total
expenditure of income exceeds expenditure
Point of balance/equilibrium Point where supply & demand intersect
Cateris-paribus All other things the same
Supply Quantity of product or service which produces
is prepared to offer at specific price.
Inversely related One part goes up other part goes down
LAW OF DEMAND
• Consumers – buy more of product when price drops and less when price rises.
• Lower the price – higher the demand for the product or service.
• Higher the price – lower the demand for product or service.
• Law states – demand for products & services is inversely related. Meaning –
as one part goes up (price) other part (demand) goes down.
TWO TYPES OF DEMANDS
Individual Demand Quantity of goods & services a person prepared to buy
at given price
Market Demand Total quantity – goods & services purchased by entire
market at given price
FACTORS AFFECTING DEMAND:
Change in Income Consumer income increase – so does their purchasing
Change in Fashion changes – interest of consumers change + their
tendency/fashion purchasing habits
Advertisements Good publicity – influence consumer demand
DEMAND SCHEDULE:
• Table – indicates cateris-paribus – quantity of goods / services demanded
during given period @ different prices.
Market demand for bread
Price Quantity demanded
R2.00 10
R4.00 8
R6,00 6
3 Matters indicated in schedule:
1. Law of Demand: Price rises, quantity demand drops.
2. Quantity Demand: When price is cheaper, consumer purchases more
1
, 3. Demand: Demand present in quantity demand column.
Graphic representation of demand curve:
Demand
Price
D
Quantity
• Demand Curve – indicates ratio between price + quantity demand.
• Curve – declines from left to right
• Negative decline – result of inverse ration between price & quantity
demanded.
Change in demand:
• Level of consumer income rises – enable consumers to purchase more
goods/services resulting in rise of demand for products & services.
Price
D2
D
D3
Quantity
Rise in demand for goods/services occurs due to:
1. Rise in consumer income
2. Rise in size of population
3. Climate change
Decline in demand for goods/services
1. Decline in consumer income
2. Decline size of population
3. Change in consumer market
2
