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Business Paper 1 > Markets > Flashcards

Markets Flashcards

1
Q

What is a market ?

A

Place where buyers & sellers trade goods and services with each other

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2
Q

Where can markets be located ?

A

Physically or online

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3
Q

What is competition ?

A

2+ sellers of similar goods and services act independently to persuade buyers to choose their products

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4
Q

What is a local market ?

A

Customers only travel a short distance to purchase goods and services

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5
Q

What is a global market ?

A

Goods and services offered for sale across different countries

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6
Q

What is a seasonal market ?

A

Sales are concentrated in a particular part of the year

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7
Q

What is a mass market ?

A

Large market of customers which is undifferentiated & sells products to suit large number of people

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8
Q

What are 2 advantages of a mass market ?

A
  1. EOS
  2. Easier to afford large advertising & marketing campaigns
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9
Q

What are 2 disadvantages of a mass market ?

A
  1. High competition
  2. Expensive = need USP
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10
Q

What is a niche market ?

A

Smaller part of a large market with products tailored specifically to customer needs

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11
Q

What are 2 advantages of a niche market ?

A
  1. Less competition
  2. Cheaper = no USP
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12
Q

What are 2 disadvantages of a niche market ?

A
  1. Fewer potential customers
  2. Needs marketing
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13
Q

What are 2 differences between mass & niche markets ?

A
  1. Niche market is small & focused on one type of customer
  2. Mass market may have lower price
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14
Q

What are trade markets ?

A

Business selling to another business

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15
Q

What is a consumer market ?

A

Selling product to the general public

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16
Q

What is market analysis ?

A

Process of gathering information about things that affect business conditions

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17
Q

What is market data ?

A

Information collected by a business from different sources

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18
Q

What 3 things does market data help a business to understand ?

A
  1. Market size
  2. Market share
  3. Market trends
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19
Q

What is market size ?

A

Total value/quantity of demand in a specific market/period of time

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20
Q

What is market share ?

A

Proportion of sales a business/product has achieved expressed as % in period of time

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21
Q

What are market trends ?

A

Taking series of market data over period of time to try predict what will happen in future

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22
Q

How can a business use market data ?

A

Analyse & predict future trends to inform important decisions

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23
Q

What is market segmentation ?

A

Dividing a market into smaller set of customers who have similar needs & interests

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24
Q

What 5 ways can a market be segmented ?

A
  1. Gender
  2. Age
  3. Location
  4. Income
  5. Demographics
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25
What 4 reasons is market segmentation important ?
1. Can decide what segments to focus on 2. Marketing can be focused to specific customers 3. Business become more cost effective & efficient 4. Customers buy products that meet needs more
26
What are 3 advantages of market segmentation ?
1. Increased brand loyalty 2. Can understand & meet needs effectively 3. Reduces price sensitivity, improves revenue
27
What are 4 disadvantages of market segmentation ?
1. Expensive 2. Additional marketing 3. Potential to lose brand identity 4. Unable to exploit EOS
28
What is a competitive environment ?
How fiercely other businesses compete with products that another business makes
29
What is monopoly ?
One dominant business within a market, owns over 25%
30
What 2 things are a monopoly business able to do ?
1. Restrict choices that consumers have over products & services 2. Charge higher prices
31
What are 2 advantages of a monopoly ?
1. EOS 2. High profit = faster rate of technological development
32
What is an oligopoly ?
Market dominated by a few businesses, each having control over market
33
What is a disadvantage of an oligopoly ?
Likely to encourage competitors attracted by high profits & large growth
34
What is perfect competition ?
Market where buyers & businesses are so great in number & well informed about each other that market price can't be controlled by one firm
35
What 2 things can happens in a perfect competition market ?
1. Products easily substituted 2. New businesses enter & exit market easily
36
What is a disadvantage of perfect competition ?
Seen as goal rather than achieveable market
37
What is monopolistic competition ?
Many firms offer products that are similar but not exact substitutes
38
What are the 4 differences between monopoly & monopolistic competition ?
1. Low barriers to entering & leaving 2. Many businesses have control over price 3. Lots of advertising 4. Consumers find it difficult to decide a fair price
39
What 2 things does a business need to do to respond to competition ?
1. Lower prices 2. Improve customer service
40
What is a disadvantage of changing competition ?
May not have sufficient funds to respond
41
What is a way to increase competitive advantage ?
Create USP
42
What market has little need to protect consumers from business exploitation ?
Perfect competition
43
What are 4 reasons for protecting consumers ?
1. See profit as main motive = overcharging customers 2. Fair advertising vs misleading of false statements 3. Reduce costs = unsafe & defective products 4. Large interest to give credit to consumers & pressure consumers into signing agreements to products they don't want
44
What is legislation ?
Laws passed by Parliament in UK & EU that affects businesses
45
What are the 5 areas of legislation that affect businesses ?
1. Consumer protection laws 2. Sale and supply of goods act 3. Trae descriptions act 4. Environmental protection 5. Competition policy
46
What are consumer protection laws ?
Aimed at making sure businesses act fairly towards customers & consumers
47
What is the Sale & Supply of Goods Act ?
Goods must be of satisfactory quality
48
What is the Trade Descriptions Act ?
Goods & services must perform in the way that was advertised
49
What is environmental protection ?
Laws to protect the environment that have big effect on businesses including Clean Air Act 1956
50
What is competition policy ?
Laws aiming to ensure that fair competition takes place in each industry
51
Who investigates competition ?
The Competitions & Markets Authority - against individuals committing cartel offences
52
What is cartel ?
Association of manufacturers & suppliers formed with the purpose of maintaining prices at high level & restricting competition
53
What is demand ?
Amount of good or service that customers are prepared to buy at a given price within a given period
54
How is demand/supply usually illustrated ?
Demand/supply curve diagram
55
What does the X axis on a demand/supply curve diagram represent ?
Quantity of goods or services being sold/supplied
56
What does the Y axis on a demand/supply curve diagram represent ?
Price they are sold at/supplied at
57
What does each point of a demand/supply curve represent ?
Amount of goods or services a customer is willing to buy at that price/business willing to supply at that price
58
What 8 factors lead to a change in demand ?
1. Change in price of substitutes 2. Change in price of complementary goods 3. Change in consumer income 4. Taste 5. Advertising & branding 6. Demographics 7. External shocks 8. Seasonality
59
What is a complementary good ?
One that is used together with another good
60
What does it mean if the demand/supply curve shifts to the left ?
Decrease
61
What does it mean if the demand/supply curve shifts to the right ?
Increase
62
What is supply ?
Amount of goods or services provided at a time at a given price
63
What 5 factors lead to a change in supply ?
1. Changes in costs of production 2. Introduction of new technology 3. Indirect taxes 4. Government subsidies 5. External shocks
64
What is equilibrium ?
The price at which quantity demanded by customers = quantity supplied by businesses
65
What does price elasticity of demand measure ?
Responsiveness of demand to a change in price
66
What does it mean if PED is between 0 & -1 ?
Demand is price inelastic
67
What does it mean if PED is -1 ?
% change in demand = % change in price
68
What does it mean if PED is +1 ?
Demand is price elastic
69
What are the 4 factors influencing PED ?
1. Number of close subsitutes 2. Cost of switching between products 3. Whether its luxury or essential 4. Whether its consumed out of habit
70
What 3 things can a business do if a product is sensitive to price ?
1. Cut costs 2. Cut price 3. Attempt to make products more inelastic
71
What is income elasticity of demand & equation ?
Measures responsiveness of demand to a change in households' real income. = % change in quantity demanded / % change in income
72
What YED to normal goods have ?
Positive
73
What YED do luxury goods have ?
More than +1
74
What YED do inferior goods have ?
Negative
75
What are 2 factors influencing YED ?
1. Degree of attractiveness of product to consumer 2. How large a proportion of household income is spent on item
76
What 2 things can a business do if a their main product is highly income elastic luxury brand ?
1. Focus new product development on value for money product to appeal lower income customers 2. Focus purely on luxury sector but be cautious on financial side

Business Paper 1 (11 decks)

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