1. State 6 external factors that may affect a business’s decisions Income levels Price of other goods – substitutes or compliments Changes in tastes and fashions Changes in population Legislation Costs of factors of production The weather

2. What happens to the amount consumers are willing and able to buy as the price of a product falls?  Demand will increase for a normal good. As the law of demand states as the price of a good decreases the demand for that good will then increase. Q P

3. State four factors that cause the market demand to move to the right  Demand thus increases  Incomes increase  Increase in advertising  Price of substitutes increases  Price of complimentary goods decrease  Change in tastes and fashions in favour of a product  Increase in population  Legislation – law requiring cyclists to wear helmets increases the demand for bike helmets.

4. What happens to the amount businesses are willing to offer to the market as price increases?  Firms will want to supply more on to the market as they are making more profit off each unit if they are now selling it at a higher price (ceteris paribus).

5. State four factors that cause the market supply curve to shift to the left  Decrease in supply  Increase in costs of factors of production  Adverse weather conditions – lower yield  Objectives of the firm  Increase in indirect taxes  Decrease in productivity

6. What effect will a shift in demand to the left have on equilibrium price and the supply by businesses in a market? D1 D S Q P Decrease in demand. Decrease in amount supplied at the lower price. Equilibrium price will drop.

7. What effect will a shift in supply to the right have on equilibrium price and the demand by consumers in a market? D S S1 Increase in supply will result in a decrease in the equilibrium price as demand increased

8. What problems will excess supply cause for some businesses in a market?  Storage costs  Wastage  Decrease in profits as you may have to sell your products at a discount.