1.3.1 - 1.3.6 Flashcards
Effective demand
The willingness and ability to buy a product
Consumer sovereignty
The consumer is king
The consumer will buy what the consumer wants
Tastes
The desires of the consumers
Advertising and branding
The process of making the public aware of a particular brand
Substitutes
Replacing a component for … Benefits
Financial
Efficient
Environmental
Complementary goods
A product that gives an extra incentive to buy another product
Income
Amount earned in one working year by an individual or business
Population
General public
Price
Amount of money that a business is selling a product for
Demand schedule
Estimation of demand that a certain product gets
Demand curve
Represented as a graph (Supply Vs Demand) | \ / | \ / | \ /--------------Supply | \ / | \ / | \ / | \ / | X----------------------Equilibrium | / \ | / \-------------------Demand | / \ | / \ | / \ | / \ | / \ L\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Contraction of demand
When the price of the product rises,
The demand will be reduced because the market is more niche
Extensions of demand
Demand for a good or service increases
Shift in demand curve
Supply shifts to the left of the original curve
Unchanged = Equilibrium
Increased demand
Decreased demand
Supply curve
The amount of supply that is needed to reach market equilibrium
Short run
Short term solutions
Long run
Long term solutions
Excess supply
Too much of a product
(Price need to be reduced)
(Decreased production)
Excess demand
Too many people want a product
(Increase cost)
(Increase supply)
Market clearing
Equilibrium price where supply is the same or outweighed by demand
Profit signalling mechanism
Potential profits directing entrepreneurs to gaps in the market
Ceteris Parabis
The assumption that all variables stay the same other than the one being studied
Price mechanism functions
An economic model that helps to explain the allocation of resources between different possible uses. It shows how the “invisible hand” guides resources towards production of what customers will buy
Signalling
Prices give signals to the producers and consumers
Rationing
Only those willing and able to pay the price get the products/resources
Incentives
‘Probability’ motives firms
‘Value for money’ motivates consumers
Economic models
Used simplified assumptions to describe economic relationships.
These allow us to isolate individual changes and analyse their consequences, avoiding the complications that occur when several things are changed at once.
Allocation of resources
The way in which economic agents take decisions about what to buy, what to produce and how best to use the land available land/labour/capital
Differentiated product
Products appear distinctive to increase sales and increase price in time
Mass markets
Competitive markets
Oligopoly
A few large, dominating firms and lots of other smaller firms within a market
Market power
When a company differentiates a product so they can control price and amount produced
Niche market
Small market segment with specific requirements
Market research
Researching a market to determine the likelihood of success
Primary market research
Fieldwork:
Researching the market yourself
Secondary market research
Pre-existing research about other businesses
Quantitative market research
Focussing on factual data within a market
Qualitative market research
Focussing on opinions of consumers within a market
Sampling
Asking people for their opinions using surveys and questionnaires
Bias
Opinions that do not accurately represent the consumers as a whole
Random sample
Researching randomly while specifically asking certain questions
Quota sample
Results of a different individuals reflect population opinions as a whole
Stratified samples
Similar to the quota sample but more accurate because it focuses results
Market segmentation
Splitting a market up to determine who the more likely consumer will be
Market positioning
Using the product and likely consumers to determine the segment of the market to aim for
Repositioning
Where a product loses its attraction in the target market/wants to expand into a larger market segment
Market map
Plotting key product features on a diagram
Competitive advantage
Using the ‘Market Map’ and positioning to combine features of rival company products to find a gap in the market
Product differentiation
Developing a unique product to entice consumers
Unique image/USP
Competitive pricing
Researching other products to set a similar price to competitors to reach higher profit margins
