Starter
• Get out your cheat sheet for supply and
demand. Did you include:
•
•
•
•
Supply and demand graphs?
Reasons why supply shifts?
Key points on both graphs.
Reasons why demand shifts?
Homework – Due Thursday 14th
• Work out the PED for each, and comment on your
result.
• The price of DVDs today is £200, and the quantity
demanded is 4m. Next year the price falls to £180
and the quantity demanded rises to 6m.
• The price of Pens today is £1, and the quantity
demanded is 1m. Next year the price rises to
£1.10 and the quantity demanded falls to 950,000.
• The price of The Times today is 40p, and the
quantity demanded is 2m. Next year the price falls
to 30p and the quantity demanded rises to 2.2m
Question 1
Calculate the %
change in price
Price new – Price old
Price old
x 100
180-200/200 x100 = -10%
Calculate the % change
in quantity (Q):
New Q – Old Q
Old Q
x 100
6-4/4 x100 = 50%
Then % change in Q / % change in P
50/-10= -5
>1 means that the demand is elastic,
Question 2
Calculate the %
change in price
Price new – Price old
Price old
x 100
1.10-1/1 x100 = 10%
Calculate the % change
in quantity (Q):
New Q – Old Q
Old Q
x 100
950,0001,000,000/1000000
x100 = -5%
Then % change in Q / % change in P
-5/10= -0.5
<1 means that the demand is inelastic,
Question 3
Calculate the %
change in price
Price new – Price old
Price old
x 100
30-40/40 x100 = -25%
Calculate the % change
in quantity (Q):
New Q – Old Q
Old Q
x 100
2.2-2/2 x100 = 10%
Then % change in Q / % change in P
10/-25= -0.4
<1 means that the demand is inelastic,
Sample question 1
Case study on next slide
1 mark for
stating the
formula
3 marks for
making the
calculation
Answer question 1
• Knowledge 1 mark for stating the formula
• Calculation 3 marks:
• Step 1 – what do we know?
– We know from the question that the PED value
is (-0.8)
– We know from the case study that the original price
was £20
– We know from the question that the price has risen by
£3
• Step 2 Find the % change in price:
Price new – Price old
Price old
23-20
20
X 100
3
20
15%
x 100
x 100
• Step 3: Calculate % change in quantity
demanded
(-0.8) x 15%
(-12)%
The final answer is: (-12)%
Activity
• Draw and label a supply and demand curve.
Adjust your supply and demand curve
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
An increase in the population of car
buyers aged 20-70
1
UK Car Market
Price
S1
P2
P1
D2
Demand
Right
D1
Q1
Q2
Quantity
An increase in the population of car
buyers aged 20-70
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
A reduction in subsidies given by
the government to car firms
2
UK Car Market
S2
Price
S1
P2
P1
Supply
Left
D1
Q1
Q2
Quantity
A reduction in subsidies given by
the government to car firms
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Increased road tax on cars
3
UK Car Market
Price
S1
P1
P2
Demand
Left
D1
D2
Q2
Q1
Quantity
Increased road tax on cars
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Increasing regulation requires all cars to be registered
on a national database by manufacturers and assessed
for a new quality certificate before being sold
4
UK Car Market
S2
Price
S1
P2
P1
Supply
Left
D1
Q1
Q2
Quantity
Increasing regulation requires all cars to be registered
on a national database by manufacturers and assessed
for a new quality certificate before being sold
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Improvement in high speed rail
services and tram networks
5
UK Car Market
Price
S1
P1
P2
Demand
Left
D1
D2
Q2
Q1
Quantity
Improvement in high speed rail
services and tram networks
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Increased petrol prices
6
UK Car Market
Price
S1
P1
P2
Demand
Left
D1
D2
Q2
Q1
Quantity
Increased petrol prices
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
New law allows drivers to continue
driving until 85 years old using
existing licence (currently 70)
7
UK Car Market
Price
S1
P2
P1
D2
Demand
Right
D1
Q1
Q2
Quantity
New law allows drivers to continue
driving until 85 years old using
existing licence (currently 70)
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
New technology allows Lithium ion
batteries for electric cars to be developed
at half the existing cost
8
UK Car Market
Price
S1
S2
P1
P2
Supply
Right
D1
Q1
Q2
Quantity
New technology allows Lithium ion
batteries for electric cars to be developed
at half the existing cost
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
UK car firms increase advertising by
140%
9
UK Car Market
Price
S1
P2
P1
D2
Demand
Right
D1
Q1
Q2
Quantity
UK car firms increase advertising by
140%
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Rise in average wages for car
manufacturers
10
UK Car Market
S2
Price
S1
P2
P1
Supply
Left
D1
Q1
Q2
Quantity
Rise in average wages for car
manufacturers
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Consumer fitness trends favour
using bikes to get to work
11
UK Car Market
Price
S1
P1
P2
Demand
Left
D1
D2
Q2
Q1
Quantity
Consumer fitness trends favour
using bikes to get to work
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Lower disposable incomes in UK
due to higher mortgage costs
12
UK Car Market
Price
S1
P1
P2
Demand
Left
D1
D2
Q2
Q1
Quantity
Lower disposable incomes in UK
due to higher mortgage costs
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Lower interest rates affect
businesses and consumers
13
UK Car Market
Price
S1
S2
P2
P1
D2
D1
Q1
Q2
Quantity
Lower interest rates affect
businesses and consumers
Demand
Right &
Supply
Right
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
Fall in cost of steel imported to UK
14
UK Car Market
Price
S1
S2
P1
P2
Supply
Right
D1
Q1
Q2
Quantity
Fall in cost of steel imported to UK
UK Car Market
Price
S1
P1
Demand and
Supply
Scenarios
D1
Q1
Q2
Quantity
New law states UK drivers must be
aged 19 or over
12
UK Car Market
Price
S1
P1
P2
Demand
Left
D1
D2
Q2
Q1
Quantity
New law states UK drivers must be
aged 19 or over
(c) Using the data from Extract A, construct a supply and demand diagram to
illustrate the impact of YOTEL’s decision on the Singapore hotel market.
Activity
• Complete data response 2, page 49.
Homework – Due Tuesday 19th January
• Complete data response 2, page 49.
• Make a cheat sheet for:
– Market Research
– Market positioning
– 8 mark questions
– 10 mark questions