Market Flashcards
market
a place/situation where buyers and sellers of goods and services come together to exchange g/s
price
the rate of exchange of the g/s that is being sold
products
a good (physical, tangible )
eg.) food
3 types of market
financial market- receiving loan from bank
labour market- getting job @ Maccas
education market- BCC offering their education services
services
an intangible product
eg.) bus ride
what does the market decide
what to produce and how to produce through the operation of the price (or market ) mechanism
4 different types of market structures
perfect and pure competition
monopolistic
monopoly
oligopoly
market structure- perfect competition
-price taking
-homogenous products-identical and substitutable
-easy entry and exit
Australian market-market based capitalist
resources are mostly privately owned
important decisions are made through unregulated interactions of buyer and sellers
government regulations is minimum/ when required
what and how much to produce?
how to produce?
for whom to produce?
lessons 2
lesson 2
lesson 2
non- price factors which influence demand (disposable income )
disposable income is the income left for spending after receiving welfare payments and paying income tax
how does disposable income change?
change in income tax rates
increase in pay rates/income
increase in minimum wage
non- price factors which influence demand (Changes in Population Size)
Population size is the number of individuals in the economy
How does population size change?
- Birth rate increases/decreases
- Immigration increases/decreases
non-price factors which influence demand (Preferences and Tastes)
Preferences and tastes, the choice of the individuals, which changes over time due to influence of marketing and promotion of products by individuals.
How does preferences and taste change?
- New trendy product in the market
-> Better promotion of the product - New discovery about how a certain product is beneficial
non- price factors which influence demand (Interest Rates)
The cost of borrowing is usually measured by the level of interest rates attached to various forms of credit, such as credit cards or home loan rates.
non-price factors which influence demand (Price of a substitute)
Substitutes are the products who are somewhat homogenous or can be replaced for each other.
Include in summaries
For example, Coke and Pepsi; butter and margarine.
non-price factors which influence demand ( Price of a complement)
Complements are the products that are typically consumed together.
For example, sugar and coffee; bread and margarine.
non-price factors which influence demand. (Consumer Sentiment)
Consumer sentiment/confidence is consumer perceptions about future income levels or job prospects.
This refers to consumer spending on non-essential goods and services such as eating at a luxury restaurant.
non-price factors which influence demand (Onset of the season)
Season of the year is an important factor in determining the demand for certain products.
For example, woollen clothes, heaters are more popular in winters.
Whereas, ice creams, air conditioners and beach equipments are more popular in summers.
non-price factors which influence demand (Government Intervention/Policies)
Government intervention influence producers and affect demand in various markets.
For example:
Subsidies- subsidies for solar panel, first home grant
Taxes-indirect taxes such as taxes on alcohol and cigarettes
Rebates- child care rebates
Laws/regulations such as restricting smoking in public places.
supply
wilingnes / ability of supplier / producer to produce and or sell goods and services
law of supply
As the price of a product increases the quantity supplied increases
As the price of a product decreases the quantity supplied decreases
there is positive relationship between quantity supplied and price
equilibrium price
equilibrium quantity
disequilibrium shortage
i
disequilibrium surplus
price mechanism
r
relative price
relative price eg
price elasticity of demand
responsiveness of total quantity demanded of a product to a change in the price of that product
determines the slope/gradient of the demand curve
inelastic= hard to change
elastic=change easily
price elasticity of demand formula
percentage change in quantity demanded/ percentage change in price
elastic demand
when the change in demand is large when there is a change in price
eg.) cookies
inelastic demand
the change in demand is small when there is a change in price
eg.) bread, gasoline, milk
factors that affect price elasticity
(the degree of necessity)
necessities tend to have an inelastic demand whereas luxuries tend to have a more elastic demand. For example, groceries vs iphone.
factors that affect price elasticity
(Availability of substitutes)
the more close substitutes there are in the market, the more elastic is demand because consumers find it easy to switch. For example, different brands of mobile phones offering similar features.
factors that affect price elasticity (Proportion of Income)
The price elasticity of demand tends to be low when spending on a good/ service is a small proportion of their available income.
Therefore, a change in the price of a good exerts a very little impact on the consumer’s ability to purchase the good.
Whereas, when a good / service represents a large chunk of the consumer’s income, the consumer is said to possess a more elastic demand.
ped guide
High PED = > 1
Medium PED = 1
Low PED < 1
price elasticity of supply
measures the degree of responsiveness of quantity supplied of a commodity to change in its price
PES guide
High pes- large price elasticity of supply (elastic)
Low pes- small price elasticity of supply (inelastic)
