1.3 introducing market

Question 1

consumer sovereignty

Answer 1

the principle that consumers, through their purchasing decisions, determine the demand for goods and services

Question 2

demand

Answer 2

quantity of a good or service consumers are willing and able to buy at a given price

Question 3

law of demand

Answer 3

inverse relationship between the
price of a good and the demand for a good - as prices fall customers buy more and vice versa

Question 4

shifts in demand

Answer 4

• population
• advertising
• substitute goods
• income (disposable)
• fashion + trends
• income tax
• complementary goods

Question 5

producer objectives

Answer 5

when prices are high, suppliers are willing to produce more output

Question 6

supply

Answer 6

quantity of a good or service business are willing and able to provide at a given price.

Question 7

shifts in supply

Answer 7

• production costs
• indirect tax
• no of firms
• technology
• subsidies
• weather (external shocks)

Question 8

equilibrium

Answer 8

when the price and quantity are at a level at
which supply equals demand - market ‘clears’

Question 9

excess demand

Answer 9

where demand outstrips supply - leads to shortage

Question 10

excess supply

Answer 10

where supply is greater than demand - leads to surplus

Question 11

ceteris paribus

Answer 11

all things being equal

Question 12

perfectly competitive market

Answer 12

• homogenous products (basic generic items)
• large numbers of buyers and sellers
• perfect knowledge of prices
• low barriers to exit and entry in the market

Question 13

price mechanism

Answer 13

the means by which millions of decisions taken by consumers and businesses interact to determine the allocation of scarce resources

Question 14

incentive

Answer 14

consumers choices reflect demand so higher prices act as incentive to suppliers to raise output

Question 15

signalling function

Answer 15

consumers decisions inform suppliers (e.g. more demand from customers signals to suppliers to increase output and raise prices)

Question 16

rationing function

Answer 16

prices serve to ration scare resources (if there is a limited supply prices are higher so only a certain number of people are willing and able to purchase)

Question 17

mass market

Answer 17

one where products used by most people are sold in large quantities meaning there are large numbers of buyers and sellers

Question 18

niche market

Answer 18

a smaller part of a larger market where customers display similar characteristics and where there are only a few suppliers

Question 19

market share

Answer 19

% of all sales within a market that are held by a particular product/company

Question 20

potential market growth

Answer 20

implies increase in demand for a product
depends on:
- whether the product is luxury or not
- new technology
- creative destruction
- changing fashions

Question 21

market research

Answer 21

systematic and objective collection, analysis, and evaluation of information intended to assist the marketing process

Question 22

reasons for market research

Answer 22

• understand and identify consumers wants and needs
• understand patterns and purchasing behaviours
• predict future trends
• reduce risk of product failure
• measure how effective marketing strategy has been
• provide latest and up to date market information

Question 23

primary

Answer 23

gathering information from a first hand source: observation, surveys + questionnaires, focus groups

Question 24

secondary

Answer 24

finding and using information that has been collected by someone else: internet, government reports, market reports

Question 25

qualitative

Answer 25

information about the market based on subjective factors such as opinions and reasons (cost and time implications)

Question 26

quantitative

Answer 26

information about the market based on numbers and trends (quick and easy to collect but not as in depth)

Question 27

limitations

Answer 27

non sampling errors - caused by human error
sampling errors- sample size too small/ not representative

Question 28

quota sampling

Answer 28

population is divided by the most important variables such as income, age and location and the required quota is selected from each segment

Question 29

random sampling

Answer 29

makes sure every member of the public has an equal chance at selection

Question 30

stratified sampling

Answer 30

target population is subdivided into segments of same characteristics and members are chosen from each strata

Question 31

market segmentation

Answer 31

sub group of consumers with similar characteristics in a given market

Question 32

types of segmentation

Answer 32

• geographic
• demographic (characteristics e.g. age, income, gender)
• psychographic (lifestyle choices/personality e.g. social and economic values/status)

Question 33

target market

Answer 33

group of consumers with common needs/wants that a business decides to sell to

Question 34

market positioning

Answer 34

designing a product that meets needs of consumers better than the competitors do

Question 35

competitive advantage

Answer 35

an advantage based on price, quality, service, reliability, reputation or innovation

Question 36

product differentiation

Answer 36

a products feature that differentiates it from other competing products in the market - USP (unique selling point)

Question 37

added value

Answer 37

difference between price of finished product and cost of inputs used to make it
- convenience, branding, quality, design and unique selling point

Question 38

dynamic markets

Answer 38

changing all the time

Question 39

stable markets

Answer 39

pace of change is slow, prices stay similar