Ch3 Flashcards
Microeconomics
How prices and quantities of goods and services behave in a free market
Quantity demanded
The quantity of a good or service people are willing t buy at various prices.
Price high-> demand low
Price low-> demand high
Quantity supplied
Quantity of a good or service that businesses will make available at various prices.
Price high -> supply more
Price low -> supply less
How do demand and supply interact to determine prices
Quantity demanded depends on the $ of the product or service and quantity supplied also depends on the price of a product or service
Equilibrium
Where demand and supply curve meet. Is achieved by market adjustments of quantity and price.
Quantity supplied= quantity demanded
What causes changes in demand curve
Income, fashion, taste, increase in price
What causes changes in supply curve
Price of labour, fabric price goes up, changed in price of other goods.
4 types of market structures
Perfect competition: many firms, no ability to control prices, no barriers to entry, very little product differentiation, eg. Wheat, corn
Pure monopoly: only one firm, ability to control prices is high, government regulations are a barrier to entry, no direct competition, eg. Utilities, water/oil
Monopolistic competition: fewer firms than perfect competition, some ability to control prices, few barriers to entry, some difference between products, eg. Clothing
Oligopoly: few firms, some ability to control prices, many barriers to entry, some differences between products, eg. Phones, banks
Relationship management
Involves building, maintaining, and enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships.
Long term customers
Buy more, take less of company’s time, less sensitive to price, bring in new customer, no start up fee.
Strategic alliances
Forming cooperating agreements between business firms.
Porters 5 forces
Helps the analyst determine strengths, weaknesses, opportunities, and thoughts, (SWOT) faced within a market so they can develop a strategy to compete properly. It is used to analyze a competitive market. Threat of new entry, threat of substitute, buyers power, supplier power, competitive rivalry
Threat of new entry
Time and cost of entry, specialist knowledge, economics of sale, cost advantage, and tech advantage
Threat of substitute
Substitute performance, cost of changing
Buyers power
Number of buyers, size of each order, product differences, price sensitivity, cost of competitive substitutes
Suppliers power
Number of suppliers, size of supplies, frequency of service, ability to substitute, price of substitutes
Competitive rivalry
Number of competitors, quality of differences, switching costs, customer loyalty.
Strategies for pricing products
Price: perceived values that is exchanged for something else
Perceived value: referred to the perception of the products value at the time of transaction
Barter: when products are exchanged for one another
Why is price important
Important in determining how much a firm earns
Maximize return
Charge a price that will allow the firm to earn a fair return on investments
Market share
Total % of total market in terms of volume or revenue
Price skimming
Introducing a product at a high price and then lowering the price over time
Penetration pricing
Company offers new products at low prices in the hopes of achieving a large sales volume
Leader pricing
Pricing products below the normal markup, or even below cost, to attract customers to a store they wouldn’t otherwise not shop at.
Pricing of services
May be priced as standard services. Harder to price than goods
Bundling
Grouping two or more related products together and pricing them as a single product
Psychological pricing
Setting a price at an odd number to connote a bargain at an even number to imply quality.
Prestige pricing
Raising price of a product so it is perceived as being higher quality.
Unethical business activities
Taking things that don’t belong to you, saying things that you know aren’t true, giving or allowing false impressions, buying influence or engaging in conflict interest, hiding or divulging info, taking unfair advantage, committing improper personal behaviour, abusing power and mistreating individuals, permitting organizational abuse, violating rules
Justice
What is fair according to prevailing standards of society
Utilitarianism
Focuses on the consequence of an action taken by a person or organization. Always involves winners and losers.
Deontology
Person will follow his or her obligations to another individual or society be upholding ones duty is what’s considered ethically correct
Individual rights
Certain rights that exist under certain conditions regardless of any external circumstances
Leading by example
Leaders and managers establish patters of behaviour within the organization that determine what’s acceptable and what’s not
Corporate social responsibility (CSR)
Consists of obligations beyond those required by law or union contract
4 key components of CSR
Economic, legal, ethical, philanthropic.
Illegal and irresponsible behavior
Most companies
Responsibilities to employers
Provide jobs to employer, letting them have time to enjoy and communicate, provide safe, clean, working environment
Responsibility to society
Provide community with jobs, goods, and services
Responsibility to customers
Satisfy customers, firm must deliver promises
Environmental protection
Responsible for protecting and improving the worlds fragile environment
Corporate philanthropy
Cash contributions, donations of equipment, support for the volunteer efforts
Responsibilities to investors
Company’s relationship with investors entail social responsibility.
