Component 1 - Markets Flashcards
Explain : The Concept of Income (YED) and Price (PED) elasticity of demand
YED - A measure of changes in demand of a product in response to a change in income.
PED - A measure of changes in demand of a product in response to a change in Price.
Explain : Demand, Supply and equilibrium.
Demand - Demand is the quantity demanded of a product , The demand curve shows The relationship between Price And quantity Demanded (Downward sloping)
Supply - supply is the quantity of a product Produced in a given market, The supply curve shows the relationship between price and quantity produced (upward).
Equilibrium - The market equilibrium is where demand and supply meet, it is theorised that it is naturally met due to market forces (The invisible hand) E.G A change in supply is in response to an increase in demand and therefore price.
Explain : The nature of inferior, normal and luxury goods
inferior - An inferior good has a YED of 1, They are relatively price inelastic
normal - have a YED of 1 or greater, They are relatively price elastic
luxury - Luxury goods have a YED of >1 , They are relatively price Elastic
Explain : The factors that lead to a change in demand and supply
Factors leading to a change in DEMAND
1 - Government legislation
Decrease in Tax—> increase/shift right in demand (e.g. cigarettes)
2 - A successful marketing campaign.
Consumers demand more —> increase/shift right in demand
Factors leading to a change in SUPPLY
1 - Government legislation
intro of a pollution cap —> higher production costs —> decrease in supply as producers have to comply
3 - Weather
A Bad harvest —> lower crop output
Construct and interpret demand and supply diagrams
Do it on a piece of paper
Explain : Types of market, Local/Global
Local - A business that operates within a smaller community with a smaller customer base.
Global - A business that operates in a large international market.
Explain : Mass/Niche Markets
Mass - Large and broad customer base of varied demographics (e.g. Tesco)
Niche - A smaller and narrow market appealing to a specific demographic (e.g. under armour, for sports wear
Explain : Businesses in a Seasonal Market
Seasonal - These business operate on seasonal basis and receive most of their orders at certain time of year (e.g. a pop up firework shop at Halloween/bonfire night or NYE)
Explain : Businesses in a Product/Service Market
Product - Businesses that provide a tangible physical product (e.g. housing developers)
Service - These businesses provide a intangible product (e.g. A marketing agency)
Explain : Market Segmentation
A sub-group in a larger market , Businesses divide their target market into segments with common features or who make purchasing decisions based on common factors.
Explain : Two Ways Markets can be Segmented; Demographic, , Geographic
Demographic - Age, Social class, gender, income.
Geographic - Country, Region, City or Cultures
Explain : Features of perfect competition
Perfect Competition
- Many Firms Competing
no one business has dominance over
another - Homogenous goods
all goods are the same - Perfect Information ,
Between buyers and sellers
Explain : Features of monopolistic competition
Monopolistic Competition
- Large number of small businesses in competition with each other
-Few barriers to entry
-Weak brand identity
Oligopolistic
- A few large firms dominate the market
- Brand loyalty is encouraged
- Some Barriers to entry
Oligopolistic
- A few large firms dominate the market
- Brand loyalty is encouraged
- Some Barriers to entry
Explain : Features of a Monopoly Market Structure.
Monopoly
- One Single Large firm within a market
-High barriers to entry for new firms
-Price setters
