103 - Markets

Question 1

what is a market?

Answer 1

A place where buyers and sellers meet to exchange goods and services

Question 2

What is competition?

Answer 2

Competition refers to the number of businesses in a market

Question 3

what is meant by local markets and global markets?

Answer 3

local markets - selling goods in a specific area
global markets - selling goods and services overseas/worldwide

Question 4

what is a mass market?

Answer 4

mass marketing is where a business sells to the whole market and markets the product to all consumers in the same way

Question 5

what is a niche market?

Answer 5

This is when a business targets a small segment of the overall market that has very specific needs and wants

Question 6

what are trade markets?

Answer 6

Where businesses sell goods to other businesses, also known as B2B

Question 7

what are consumer markets?

Answer 7

A consumer market is made up of the general public who purchase the product for their own consumption, (B2C)

Question 8

what are product, service and seasonal markets?

Answer 8

product = for physical tangible products
service = marketing of services
seasonal = e.g. ice cream

Question 9

what is market size?

Answer 9

The total number of sales, by value or volume, in a market as a whole

Question 10

what is market share?

Answer 10

The proportion of total sales that a particular firm controls

Question 11

what is market segmentation?

Answer 11

The process of subdividing a market into identifiable segments or subgroups, having similar needs, wants or characteristics and providing them with goods or services that meet their needs and wants

Question 12

How are markets segmented ?

Answer 12

1) Demographic- age, social class, gender, income
2) Psychographic - personality and emotionally based behaviour - attitudes, opinions and lifestyle
3) Geographic - regions of the country - different products are often needed for different countries

Question 13

Evaluation of the importance and impact of segmentation to a business and its customers

Answer 13

(+) better meet customers needs ->loyalty
(+) can attract new customers as it creates new demand -> increased revenue
(+) advertising specific groups can be more time and cost efficient
(-) risky due to potential change in customer taste could lead to loosing all sales
(-)number of sales may be limited therefore profit may also be limited
(-) some customer may feel excluded

Question 14

what are the features of a monopoly?

Answer 14

• one firm dominates the market
  -pure monopoly = a business has 100% of market
• Any business with over 25% market share is said to have a legal monopoly under the UK law and can be investigated by the CMA
• higher barriers to entry
• They are price makers

Question 15

what are the feature of an oligopoly?

Answer 15

• few businesses dominate the market
• sell differentiated products and have strong brand identity
• heavy promotional and promotional costs to ensure brand loyalty
• do not like to compete on price
• high barriers to entry
• price makers

Question 16

what is monopolistic competition?

Answer 16

• large number of relatively small firms compete with each other. No firm dominates the market
• few barriers to entry
• products are similar but slightly differentiated
• limited control over prices they are charging, more likely to be price takers

Question 17

what is perfect competition?

Answer 17

• large businesses and very low barriers to entry
• products are homogenous - no differentiation
• all buyers and sellers have perfect information about each other
• they are price takers

Question 18

what are consumers protected from?

Answer 18

-poor quality goods/services that are not fit for purpose or match the description given
- the business making untrue statements about goods/services or misleading them about the price or not giving full information
- all of the above online

Question 19

what does the trading standard department do?

Answer 19

-checks the business is complying with the trading laws
-trading standard officers visit business to investigate whether their goods are e.g.correctly described, priced clearly and sold in correct quantities

Question 20

why do consumers need protected?

Answer 20

-products sold may not meet description
-some customers are particularly vulnerable
-consumers need protection when buying online

Question 21

what is demand?

Answer 21

Demand is the quantity of a product that consumers are able and willing to purchase at various prices over a period of time

Question 22

what is supply?

Answer 22

the quantity of a product that producers are wiling and able to provide at different market prices over a period of time

Question 23

what is the market equilibrium price?

Answer 23

The market equilibrium price is the point at which supply meets demand. At this price all that is supplied to the market will be bought

Question 24

Factors that lead to a change in the quantity demanded

Answer 24

• incomes
• changes in taste and fashions
• changes in the price of other goods
• advertising/branding/publicity
• changes in population
• changes in government legislation (laws)

Question 25

what are substitute goods, how do they affect price?

Answer 25

• goods that are substitutes for each other
• a fall in the price of one could lead to a decreased demand for the other and vice versa

Question 26

what are complementary goods, how do they affect price?

Answer 26

• these goods are complements, they are bought together e.g. printer and ink
• if the price of the printer fell, the demand for the ink could increase and visa versa

Question 27

factors that lead to a change in the quantity supplied

Answer 27

• changes in business costs
• weather
• introduction of new technology
• legislation

Question 28

what is price elasticity of demand? (PED)

Answer 28

-how sensitive is demand to a change in the price
- price elastic = when a price change leads to a more than proportional change in demand (1+)
- price inelastic = when a price leads to a less than proportional change in demand (0-1)

Question 29

what is income elasticity of demand? (YED)

Answer 29

how sensitive is demand to a change in consumers income
(+) = normal good
(-) = inferior good

Question 30

what is are inferior goods?

Answer 30

goods which people tend to buy less of as they have more income

Question 31

what are normal goods?

Answer 31

These are goods where when people earn more money they will buy more of these goods

Question 32

what are luxury goods?

Answer 32

These are normal goods except the change in demand will be bigger when incomes change, usually with a positive YED of more than 1