Business Theme 1

zsolt.trenka
Flashcards by zsolt.trenka, updated more than 1 year ago
zsolt.trenka
Created by zsolt.trenka about 5 years ago
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Flashcards on Business Theme 1 , created by zsolt.trenka on 01/22/2016.

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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
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