Market forces Flashcards
What are market forces often referred to as?
Supply and demand
What is demand?
The amount of goods/services that customers are willing and able to buy at a given price
What is supply?
The amount of goods/services that sellers are willing and able to sell at a given price
What happens to demand as price increases?
Demand decreases
What is the equilibrium price?
The situation in a market where demand is equal to the supply
What is the effect of excessive demand?
There will be an increase in price due to the short supply before suppliers increase supply to capitalize on demand
What is the effect on excessive supply?
It will mean that either a decrease in price will occur or a decrease in demand
What happens to the demand/supply curve following a change in price?
The existing customers move along the curve
What happens to the demand/supply curve following a change in a factor which is not price?
The curve will shift; left for a negative factor and right for a positive factor
What are the factors which affect demand?
Price, income, wealth, advertising, taste and fashion, demographic change, government action, price of substitutes, price of compliments
What is wealth?
The combined value of assets
What is income?
The financial gain in a household
What is price?
The amount customers are willing and able to pay
What is cost?
The amount a business spends making a product
What is elastic demand?
When quantity is sensitive to a change in price
Elasticity of demand is …
The measure of how sensitive quantity demand is to a change in price
What is inelastic demand?
When quantity demand is insensitive to a change in price
What causes goods to be inelastic?
If they are essential goods
What causes goods to be elastic?
If they have lots of substitutes or are deemed a luxury
Globalisation is …
The process of integration and interdependence of national economies
What are the main factors which have caused globalization?
An increased number of transactions
Increased capital for investment
Increased movement of people
Increase in availability of knowledge
Factors which sped up globalization?
Barriers between countries decreased
Communication improved
Huge economies of scale possible
Why are some multinationals moving to developing countries?
To take advantage of low wages, fewer legal constraints, government grants and the opportunity to sell in new markets
What are the advantages of globalization?
Incoming company brings investment and jobs
News and ideas spread around the world
LDC can use foreign currency for imports
What are the disadvantages of globalization?
Benefits mainly to developed countries
Lack of clear legal framework
Multinational companies can impose ideas, morals on local populations
Jobs in developed countries move to LDCs
Factors which have increased imports?
Reduced trade restrictions
Lower cost of production abroad
Ease of transportation
What is a multinational company?
A business with operations in multiple countries
What is an international company?
A company which has operations in one country but imports and exports abroad
What is a strategy?
A plan of action
What is a global strategy?
A plan of action of a company to operate and compete in the global market, whilst achieving its aims.
A brand is …
A distinctive product offering using a logo, symbol, name, design, packaging or combination thereof to distinguish it from its competitors
A global brand is?
A brand is recognised throughout most of the world
