Business Theme 1

Question	Answer
Market (Equilibrium) - Balance Between Supply & Demand	Demand increase when price decreases Demand Decrease when price increase
Income Elasticity of Demand	Measures the relationship between the % change in quantity demanded and the % change in Income
Calculating IED	% change in demand / % change in income x 100
Normal Goods	+ Income Elasticity Increase in Income = Increase Demand (Shift Outwards)
Necessities	Positive Income Elasticity - Demand Rises In Relation To Income
Luxury Goods	Income Increases = Demand increases becasue they can buy it
Complementary Goods	Goods used together e.g Xbox with Controller - One can't be used without the other
Inferior Goods - Cigarettes - Council Houses - Supermarket Own Label Food	Negative Income Elasticity of Demand -Demand Falls when income rises because customer can afford more when their income rises -They will switch or be replaced by SUPERIOR GOODS (LUXURIES)
Business USES	Knowledge of IED helps firm to predict economic life cycle impact on product sales
Luxury Products 2	+ IED -Luxury products have greater sales because people can afford more - Necessities are less sensitive to cycle changes
In Theory	The better Off we are, the more we can afford, if so the more expensive items we buy to balance with our income
Balancing Theory...However	The worse off we are, the less we will spend, customers will want cheaper items. So, we switch to inferior goods = Sales Up - Pound land - ASDA - Iceland
Normal Luxury goods

Resource summary

	Created by zsolt.trenka about 5 years ago