Topic 1.5: Understanding the economic context
revision points
Chapter 24: Demand and supply
 Commodities
are raw materials like oil, gold and wheat, used to help make something
else, not an end product in themselves – their prices can be volatile, i.e. they can change
quickly and regularly.
 Demand
is what customers would like to buy given the income they have available in
relation to the price.
 Supply
 The
is what producers make and then are willing to sell at a given price.
market is where buyers and sellers meet to set prices that suit both.
A
commodity market is an organised market where representatives of buyers and sellers of
raw materials meet to set prices.
 Normal
(or goods) markets include all the places that bring together buyers of goods and
sellers – shops, market stalls, internet auction sites, catalogues, mail order companies,
mobile burger vans, cinemas, sports and concert venues etc.
 Price
the amount of money that an individual has to give up to acquire a good or service.
 In
a market the price is set where buyers are willing and able to pay to acquire the goods
and sellers are willing to sell what they have at that price.
 In
commodity markets prices can change all the time.
 Prices
in these markets depend on the factors affecting demand and supply.
 Demand
and supply can be affected by trends in fashions, economic activity, incomes,
expectations of consumers, factors affecting costs of production such as weather, war,
pests, disease, how easy it is to extract the commodity and so on.
 Normal
markets are associated with ordinary products, prices tend to be more stable,
customers ‘know’ prices and businesses may choose to absorb changes in commodity
prices and find other ways of cutting costs rather than raise prices in order to keep
customers.
 Price
takers are usually found in commodity markets – individual suppliers of commodities
have little control over the price they receive as they tend to be a very small part of the
total supply.
 Price
makers are usually found in ordinary markets – a business can set its price by adding
value to get profit.
© Pearson Education Ltd 2009
Edexcel GCSE Business Studies
page 1