Chapter 7 - C Flashcards
What happens when one trader is the sole provider of a product in a marketplace?
They attract many customers, leading to queues and potential sell-outs.
What occurs when other traders enter the market selling the same product?
The original trader’s customers may switch to the new traders, splitting demand equally.
What strategy does a trader use when they have leftover inventory at the end of the day?
They reduce their price to sell the remaining stock.
What effect does aggressive pricing by some traders have on the market?
It forces other traders to consider price reductions to remain competitive.
What unforeseen event can drastically change the market for a product?
A failure in the vanilla crop leading to a supply shortage.
What happens to the price of ice cream when the supply of vanilla stops?
The commodity price goes up ten-fold due to insufficient supply.
What impact does a shortage of supply have on prices in the market?
It forces prices up while demand remains unchanged.
What do manufacturers and sellers do when faced with higher production costs?
They may leave the market if they cannot sell at prices to cover costs.
What is the result of traders selling ice creams at a price lower than their purchase price?
They incur losses and may not be able to remain in the market.
Fill in the blank: The initial trader’s success attracts _______ to enter the market.
other business people.
True or False: The original trader remains the only seller in the market as demand increases.
False.
What does a market experiencing turmoil indicate?
It is out of equilibrium due to various market forces.
List the factors that can lead to a market being out of equilibrium.
- Increased competition
- Supply shortages
- Higher production costs
