market analysis

Question 1

what is market analysis?

Answer 1

involves collecting information about the market the business is operating in, in order to create effective objectives to ensure success.

Question 2

What information can this include?

Answer 2

the size of the market
the business’s relative market share
economic and political background to the market.

Question 3

what is quantitative data?

Answer 3

involves the use of NUMBERS such as the size of the market, growth of the market, or number of customers.

Question 4

what is qualitative data?

Answer 4

looks at views and opinions, but do not provide statistically reliable information.

Question 5

what factors impact demand for products/services?

Answer 5

price
income
tastes/preferences
demographics
seasonality
external factors-competition.

Question 6

what is price elasticity of demand?
(PED)

Answer 6

it measures the extent to which the quantity of a product demanded changes in response to a change is price

Question 7

what is elasticity?

Answer 7

measures the responsiveness of demand to a change in a relevant variable- such as price or income.

Question 8

formula for PED
Price Elastic of Demand ?

Answer 8

%change in quantity demanded /
% change in price

Question 9

how do you calculate % change?

Answer 9

difference /
original X100

Question 10

if the value of PED is more than 1 its…

Answer 10

ELASTIC.
demand is more than the change in price.

Question 11

if the value of PED is less than 1 it’s…

Answer 11

INELASTIC.
change in demand is less than the change in price.

Question 12

if the value of PED is exactly 1 it’s…

Answer 12

Unitary price elastic
change in demand = change in price.

Question 13

what does price elastic mean?

Answer 13

MORE THAN 1
a change in price will cause a larger change in demand.
revenues would increase with a price cut
revenues would fall with a price increase

Question 14

what does price inelastic mean?

Answer 14

LESS THAN ONE
revenues would fall with a price cut
revenues would increase with a price increase.

Question 15

how does brand strength influence PED?

Answer 15

products with strong brand loyalty and reputation tend to be price inelastic.

Question 16

how does the necessity of the product effect PED?

Answer 16

the more necessary a product, the more demand tends to be inelastic.

Question 17

how does habit influence PED?

Answer 17

products that are demanded and consumed as a matter of habit tend to be price inelastic.

Question 18

how does availability of substitutes influence PED?

Answer 18

demand for products that have lots of alternatives tends to be price elastic.

Question 19

how does time influence PED?

Answer 19

In the short-run, price changes tends to have less impact on demand than over longer periods.

Question 20

how does increasing a price inelastic product impact on revenue and profit.

Answer 20

will lead to lower sales but increased sales revenue.
the lower sales will mean lower variable costs, so profits will increase.

Question 21

how does decreasing a price inelastic product impact on revenue?

Answer 21

will lead to a fall in sales revenue.

Question 22

how does increasing a price elastic product impact on revenue?

Answer 22

fall in sales revenue, the increase in price will be more than offset by a decrease in sales.

Question 23

how does decreasing a price elastic product impact on revenue and profit?

Answer 23

will lead to a rise in sales revenue, the fall in price will be more tan offset by an increase in sales.
higher profits will only occur if the increase in sales revenue is greater than the costs

Question 24

what does PED stand for?

Answer 24

Price elasticity of demand.

Question 25

What does YED stand for?

Answer 25

Income elasticity of demand.

Question 26

definition of YED?

Answer 26

measures the extent to which the quality of a product demanded is affected by a change in income.

Question 27

formula for YED?

Answer 27

%Change in quantity Demanded /
%change in income.

Question 28

if the value of YED is more than 1 it’s…

Answer 28

ELASTIC
usually applies to luxury goods and services.

Question 29

if the value of YED is between 0 and 1 it’s…

Answer 29

INELASTIC.
usually applies to normal gods or services

Question 30

if the value pf YED is less than 0 it’s…

Answer 30

NEGATIVE.
usually applies to inferior goods or services.

Question 31

if YED is elastic how does that affect demand?

Answer 31

demand is sensitive to changes in income, high economic growth may lead to a boom in sales.
if the economy goes into recession, sales will crash.

Question 32

if YED is inelastic how does this effect demand?

Answer 32

A rise in consumer income will result in a rise in demand
a fall in income will result in a fall in demand.

Question 33

if YED has negative elasticity how does this effect demand?

Answer 33

demand will increase during periods of recessions and economic downturns.
inferior and cheaper products are more attractive when trying to survive on a tight budget.
when in an economic boom, demand will fall as people will opt for more luxury products.

Question 34

is the YED is elastic then what’s the value?

Answer 34

greater than 1.

Question 35

if the YED is inelastic, then what is the value?

Answer 35

between 0 and 1.

Question 36

if the YED is negative, then what is the value?

Answer 36

less than 0.

Question 37

how do businesses use PED and YED?

Answer 37

to calculate how much demand will change if there is a change in price or income.

Question 38

what are the advantages of a business knowing its PED?

Answer 38

reduce risk and uncertainty
help forecast its sale and set its price.

Question 39

what does the advantages of PED depend upon?

Answer 39

the validity of the data.