1.2 Flashcards
what is supply
the quantity of a good or service that a producer is willing to provide to the market place
what goes on the x and y axis of a supply curve
x - quantity
y - price
state 6 reasons for shifts in the supply curve
changes in technology
government taxes
climate and weather
competition
subsidies paid to producers
external shocks
what is market equilibrium
when the quantity demanded equals the quantity supplied at the price that clears the market
describe the supply curve
positive correlation
describe the demand curve
negative correlation
what are the factors influencing demand
income
price of related goods
number of buyers
consumer expectations
what are the factors influencing supply
input prices
technology
number of sellers
producer expectations
what does PED stand for
price elasticity of demand
what is the equation for PED
% change in quantity demand/ % change in price
what is elastic demand
demand which changes with price of the product
what is inelastic demand
demand which does not change with price of the product
how does the value of PED tell you if a product is elastic or not
0 - perfectly inelastic
>1 inelastic
1 unit elastic
<1 elastic
what makes a product elastic
luxury goods which consumers don’t need
lots of substitutes
cost of switching is low
consumers have low incomes
low demand
what makes a product inelastic
necessities
few substitutes
customers are loyal
addictive products
high income consumers
define market
the group of individuals and organizations that make up the pool of actual and potential customers
define market size
that total value of a market in terms of money spent or number of products
define market growth
the % change in the size of a market compared to the previous year
define market share
the percentage of total sales by value or total output that a business has in a specific market
define mass market
market that is aimed at the general population
what are the advantages and disadvantages of mass markets
+/ large scale production
marketing is easy
large volume of sales
-/ lots of competition
high marketing costs
production not flexible
what is a niche market
small subset of the main market that addresses a specialist need
what are the advantages and disadvantages of niche markets
+/ charge a premium price
easier to target customers
production is flexible
less competition
USP
-/ not constant demand
high unit cost
no economies of scale
define dynamic market
subject to rapid or continuous changes in supply and demand
markets change due to….
economic growth
nature of the product
trends
changes in technology
competition
what are the 3 ways firms compete
price
product range
customer service
what is offensive marketing
trying to increase sales & develop new markets e.g. innovation
what is defensive marketing
reacting to competition
define innovation
improving existing products
what are the advantages and disadvantages of innovation
+/ competitive advantage
charge a higher price
encourages brand switching
-/ high R&D costs
disruption to production
impact sales of current products
what is market orientation
decisions are made based on information about customer needs & wants
what is product orientation
develop product based on what they are good at making
define demand
the amount of a good that consumers are willing or able to buy at a given price
what factors influence demand
price
consumers disposable income
substitute availability
trends
advertising
seasonal
what are inferior goods
basic low quality goods
what are substitute goods
perform a similar function
