markets

Question 1

what is the definition of markets

Answer 1

A meeting place between buyers and sellers
where goods and services are exchanged, usually
for money

Question 2

what is market share

Answer 2

The percentage of the total revenue or sales in a market that a company’s business makes up

Question 3

how is market share calculated

Answer 3

(number of products sold (firm’s sales)/ number of products sold in market (total sales) x 100

Question 4

what is the importance of having a high market share?

Answer 4

• increases barrier of entry for new firms
• high brand awareness/ loyalty –> inelastic demand
• price maker status
• increase growth
• Can become the brand leader.
• Attract new shareholders.

Question 5

what are global markets

Answer 5

Global marketing is all about buyer and sellers meeting and selling goods or services to overseas markets.

Question 6

what are the advantages of global markets

Answer 6

• new market –> increased market share –> increase profits
• early movement reduces competition from new firms and lead to price maker status in new marklet
• Economies of scale
• Spread risks
• Survival – some businesses need to be global
  to survive.

Question 7

what is mass marketing

Answer 7

Mass marketing involves a business
aiming products at a whole market, rather than
particular parts of them, for example, tomato
ketchup, tea bags

Question 8

what are seasonal markets

Answer 8

Many markets have large seasonable variations.
e,g, christmas trees only popular in christmas

Question 9

what are the disadvantages of mass marketing

Answer 9

• alot more costly
• lower conversion rate
• may not be firm specific
• ability to meet demand

Question 10

what is a niche market

Answer 10

A niche market is a specialised market segment where you cater for customers who share similar characteristics which make them more likely to buy a particular product or service

Question 11

what are the advantages of a niche market

Answer 11

• Businesses can charge higher prices/premium prices
• Have less competition
• Higher market share –> brand awareness/ loyalty

Question 12

what are the disadvantages of a niche market

Answer 12

• Smaller market/limited profit.
• Harder to raise finance
• Cannot benefit from economies of scale.
• Hard to expand.

Question 13

what is market segmentation

Answer 13

Market segmentation is breaking down a market into sub-groups of customers which share similar characteristics

Question 14

what are the methods of segmentation

Answer 14

DEMOGRAPHIC
- age/ gender
GEOGRAPHICAL
- country of residence
PSYCHOGRAPHIC/ BEHAVIORAL
- hobbies

Question 15

what are the benefits to the firm of market segmentation

Answer 15

• identify different target market
• advertise products more effectively/ efficiently
• increased sales and potentially higher profit margins due to premium pricing

Question 15

what are the benefits to the customer of market segmentation

Answer 15

• more personalised products
• can fit better with their budgets and lifestyle
• because marketing is targeted – the consumer
  is aware of new features of products.

Question 15

what are the three different types of markets

Answer 15

• Monopoly
• Oligopoly
• Perfect competition

Question 16

what are the characteristics of a perfect competition

Answer 16

• many buyers and sellers
• low barrier to entry and exit
• perfect information
• homogenous goods

Question 16

what are the characteristics of a monopoly

Answer 16

• A single producer within a market – one
  business has 100% of the marketplace. This is
  known as a pure monopoly.
• Likely to erect barriers to prevent others from
  entering their market.
• Monopolists are called price makers as they
  have a significant influence on price.
• UK and EU regard any business with over 25%
  of the market as having potential monopoly
  power

Question 16

what are the characteristics of an oligopoly

Answer 16

• There are many businesses but only a few
  dominate the market.
• Each business tends to have differentiated
  products with a strong brand identity.
• Brand loyalty is encouraged by the use of advertising and promotion.
• Prices can be stable for long periods, short
  price wars do occur.
• Some barriers to entry do exist. For example,
  high start-up costs with manufacturing

Question 17

what is the definition of perfect competition

Answer 17

Definition: a market in which many small firms
produce virtually identical products at similar
prices.
- With the ability to enter and leave the market freely.
- They don’t earn excessive profits

Question 18

what is demand?

Answer 18

the amount of a product that consumers are willing and able to purchase at
any given price

Question 19

what is supply?

Answer 19

the amount of a product that suppliers will offer to the market at a given price

Question 20

factors that cause the demand curve to shift

Answer 20

Population
Advertisement
Substitutes (price of)
Income (proportion)
Fashion
Income tax
Complementary

Question 20

Factors that cause the Supply curve to Shift

Answer 20

Productivity Indirect Taxes Number of Firms Technology Weather Cost of Production

Question 21

what is the elasticity of demand

Answer 21

The relationship between changes in demand, changes in price and income is known as the elasticity of demand

Question 22

what is the equilibrium price

Answer 22

In a free market, demand and supply equal the equilibrium price. This is the price where the quantity demanded is equal to the quantity supplied.

Question 23

what is income elasticity

Answer 23

measures how sensitive demand is to a change in income.

Question 24

what are the three types of goods?

Answer 24

- Normal goods – as real incomes increase, the demand for normal goods will also increase: positive income elasticity less than one. Examples are matches, lemonade, newspapers. - Luxury goods – the demand for luxury goods will grow at a faster rate than the increase in real income that created the change in demand: positive income elasticity that is greater than one. Examples are holidays abroad, health club membership, sports cars. - Inferior goods – these are cheap substitutes of products people prefer to buy when their income is reduced (such as value line baked beans): negative income elasticity.