3.2 - Understanding markets and consumers Flashcards
What is market growth?
Market growth describes when an industry grows in terms of either volume or value.
What is sales growth?
Sales growth occurs when a business increases its sales in terms of volume or value.
What is market share, and how is it calculated?
Market share refers to the proportion of a market that a business controls in order to satisfy customer needs.
Market share can be calculated: (sales of one product divided by total market sales of that product) multiplied by 100.
What is market research?
Market research is the process of collecting and processing information about the market that a business operates in.
What is qualitative and quantitative data?
Qualitative research generally collects information about opinions and views rather than things that can be quantified.
Quantitative research collects factual information on things that can be quantified and recorded easily.
What is market mapping?
Once businesses have segmented the market, they can use market mapping to identify a gap in the market by looking at what competitors offer.
Competitors products are mapped against different variables based on the features that they offer.
What is sampling?
When a business is carrying out market research, sampling may be used to reduce the costs associated with market research.
Sampling occurs when a business selects a sample of the population to save collecting data from everybody in that population.
Advantages and disadvantages of smapling.
Advantages of sampling
Sampling reduces cost as a business can choose a cross-section of the population instead of collecting data from everybody.
Disadvantages of sampling
Sampling may not accurately reflect the full target market if the sample is not chosen properly.
What is PED? (Price elasticity of demand)
Price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price.
Businesses can use price elasticity of demand to understand how the quantity demanded by customers will change in response to price.
How do businesses calculate PED?
PED = (% change in quantity demanded)÷ (% change in price)
The larger the price elasticity of demand coefficient (number) the greater the responsiveness of quantity demanded to a change in price.
When would a price be price inelastic in relation to PED?
If the price elasticity of demand is less than 1 (whether positive or negative) then this is described as price inelastic. This means that a change in price will lead to a change in quantity demanded which is less than the change in price.
When would a price be elastic in relation to PED?
If the price elasticity of demand is greater than 1 (whether positive or negative) then this is described as price elastic. This means that a change in price will lead to a change in quantity demanded which is greater than the change in price.
What is Income Elasticity of demand?
Income elasticity of demand (YED) measures the responsiveness of quantity demanded to a change in consumer income.
Businesses can use income elasticity of demand to understand how the quantity demanded by customers will change in response to income.
How do you calculate YED?
YED = (% change in quantity demanded) ÷ (% change in income)
The larger the income elasticity of demand coefficient (number) the greater the responsiveness of quantity demanded to a change in income.
If the coefficient is positive, an increase in income will increase demand and a fall in income will decrease demand.
If the coefficient is negative, an increase in income will decrease demand and a fall in income will increase demand.
When would income elasticity be inelastic?
If the income elasticity of demand is less than 1 then this is described as inelastic. This means that a change in income will lead to a change in quantity demanded which is less than the change in income.
