Booklet 5: Markets and Market Forces Flashcards

1
Q

What is a market?

A

A market is essentially an environment where buyers and sellers exist to exchange goods and services.

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2
Q

What is a Consumer goods and services market?

A

A consumer market is one in which a business is selling its products to the general public, (e.g. vehicles, confectionery.)

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3
Q

What is a Capital good market?

A

A capital goods market is one in which tangible products are sold from one business to another business, which in turn uses the products to produce consumer goods (e.g. Equipment is sold to a construction company).

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4
Q

What is a labour market?

A

The labour market is characterised by the availability of job opportunites and workers.

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5
Q

What is a Mass Market?

A

A mass market is a large market where consumer wants and needs are not specific.

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6
Q

Advantages of Mass Marketing?

A
  1. The product appeals to the mass market (this should improve profit margins).
  2. More customers mean more revenue.
  3. A mass-market product can be advertised and marked more effectively.
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7
Q

Disadvantages of Mass Marketing?

A
  1. High fixed capital costs are incurred.
  2. It can be difficult to appeal directly to each individual customer because mass-market products are designed to suit all customers.
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8
Q

What is a Niche Market?

A

A Niche Market represents a small segment of the larger market on which a product or service is focused.

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9
Q

Advantages of a niche market?

A
  1. Fewer competitors- allows firms to charge higher prices.
  2. Lack of economies of scale allows small firms to compete more effectively.
  3. Limited demand suits a small firm.
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10
Q

Disadvantages of a niche market?

A
  1. Limits the amount of profit.- Fewer customers= less profit.
  2. Carry more risk- specialise in a certain area wiht nothing to fall back on.
  3. An increase in interest may be enough to attract larger firms into the market.
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11
Q

What is Market size?

A

Market size- calculated by adding together all sales reported by firms within a marketplace.

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12
Q

What is Market share?

A

Market share- represents the proportion of sales a business or product line has achieved (as a %).

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13
Q

What is Market Location?

A

Location- represents the geographical territory in which the business trades.

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14
Q

What is the Differentiation of products?

A

Differentation of products- the process a business undertakes to ensure that their product/ service is sufficiently diffirent from other products/ services in order to make it more appealing to customers in a specific target market.

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15
Q

What is the definition of Demand?

A

Demand- describes a consumer’s desire and willingness to pay a price for a specific good or service.

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16
Q

What is the definition of Supply?

A

Supply- As the quantity of a good or service that producers are willing and able to supply onto a market at a given price in a given time period.

17
Q

How does Price influence Demand?

A
  1. Change in the price of substitute goods or services.

2. Change in the price of complementary goods or services.

18
Q

How does Changing consumer income influence Demand?

A

When disposable income rises, customers purchase more causing demand to increase.

19
Q

How do changing consumer tastes and fashions influence Demand?

A

Product or service is more favourable to consumer tastes or it has become more fashionable then the demand curve will shift to the right.

20
Q

How does Advertising influence Demand?

A

Advertising may cause the demand curve to shift to the right meaning demand increases.

21
Q

How do Changing Populations influence Demand?

A

If the population aged over 70 grows, then the demand for elderly products increases.

22
Q

How does Seasonality influence Demand?

A

Demand for winter clothing/ coats will increase in the winter season and decrease in summer.

23
Q

How does Government Legalisation influence Demand?

A

Increasing duty on cigarettes, can increase their price and therefore reduce demand.

24
Q

How does New technology influence Demand?

A

When new technology is introduced into a business process the product can be produced at a lower cost, which leads to an increase in the quantity supplied.

25
Q

How does Changes in the Cost of Production influence Demand?

A

When the costs of raw materials increase, overall costs rise, therefore the supply curve shifts left and the quantity supplied falls.

26
Q

How does Indirect Taxes influence Demand?

A

When indirect tax decreases (e.g. VAT), the business will want to increase the supply of the product or service. The supply curve shifts to the right.

27
Q

How do Government subsidies influence Demand?

A

Funds provided by government to a business. Typically used to subsidise to reduce costs of production. This increases supply.

28
Q

How do External shocks influence Demand?

A

Unfavourable weather conditions or natural events, e.g. flooding resulting in the destruction of crops.