Market Influence on Business Strategies Flashcards
What is a collection of buyers and sellers meeting or communicating in order to trade goods or services?
Market
What dictates price and is the maximum quantity of a specific good that consumers are willing and able to purchase at each and every price?
Demand curve
What is dictate by price?
Quantity demanded
What is the result from change in price and slides along the curve?
Change in quantity demanded
What is not due to change in price and shifts curve?
Change in demand
What is a downward sloping curve?
Fundamental Law of Demand
What effect is when consumers tend to purchase more(less) of a good when its price falls(rises) in relation to the price of other goods?
Substitution effect
What are the factors that shift the demand curve?
Wealth, Price of related goods, consumer income, consumer tastes, consumer expectations, or number of buyers
What is the maximum qunatity of a specific good sellers are willing and able to produce at each & every price?
Supply curve
What are the factors that shift supply curves?
Price expectations, production costs, price or demand for other goods, subsidies or taxes, and technology
When is a market in equilibrium?
No forces acting to change the current price/quantity combination. Also, point where the supply & demand curves intersect.
What are price ceilings?
Price established below the equilibrium price(shortage), QD>QS
What are price floors?
Minimum price set above the equilibrium price(surplus), QS>QD
What is the measure of how sensitive demand for?
Elasticity
Calculation for Price Elasticity of Demand
% change of quantity demanded / % change in price
What is not sensitive and when absolute price of elasticity < 1.0?
Price inelasticity
What is sensitive and absolute price of elasticity > 1.0?
Price elasticity
What is the absolute price of elasticity = 1.0?
Unit elasticity
Calculation for Price Elasticity of Supply
% change of quantity supplied / % change in price
Calculation for cross elasticity
% change in number of units of X demanded(supplied) / % change in price of Y
Calculation for income elasticity of demand
% change in number of units of X demanded / % change in income
What is it called when more and more units of an input are considered with a fixed amount of other inputs, output increases but at a diminishing rate?
Law of Diminishing Returns
What type of cost is the change in total cost associated with a change in output quantity over a period of time?
Marginal cost
What influences marginal cost?
Variable costs
What are the 4 market structures?
Pure competition, monopolistic competition, oligopoly, and monopoly
What market structure consists of no individual firm can influence the market price?
Pure competition
What is the strategy under perfect competition?
Maintaining the market share and responsiveness of the sales price
What market structure consists of many sellers compete to sell a differentiated product in a market
Monopolistic competition
What is the strategy under monopolistic competition?
Maintaining the market share also plan for enhanced product differentiation.
What market structure consists of few sellers dominate the sales of a product and entry of new sellers is difficult?
Oligopoly
What is the strategy under oligopoly?
Focus on market share and call for the proper amount of advertising and ways to properly adapt to price changes
What market structure consists of concentration of supply in the hands of a single firm?
Monopoly
What are the strategies under monopoly?
Ignore market share and focus on profitability from production levels that maximize profits
When does a firm operate best?
Marginal revenue = marginal cost
What are the factors of production?
Land, labor, and capital
What are the 4 components of SWOT analysis?
Strengths, Weaknesses, Opportunities, and Threats
What are the major strategies for value chain analysis?
Core competencies, industry structure, and segmentation analysis
What are the factors that affect the overall industry and competitive environment of the industry?
Economy, regulations, demographics, technological, social, and political
What are the factors that affect the competitive environment of the firm?
Barriers, Market competitiveness, existence of substitute products, bargaining power of customers, & suppliers
