Markets And Market Forces Flashcards
Market : definition
Any place where buyers and sellers come together to exchange products and services at a price.
Markets can be :
Local National International Physical Electric
Capital good : definition
By good used to help increase future production. The most common capital goods are property, plant and equipment. They are bough as a means of helping the production process. Industrial goods are used in a similar way but are incorporated into the final product. Eg IT server used to allow a social media company to host their customers data.
Consumer good : definition
Any goods that aren’t capital goods. They’re goods used by. Insurers and have no future productive use. Only supposed to be used by the end user, not employed as a tool to make other products.
Eg Sofa, computer, screwdriver.
Consumer markets : definition
The markets for products and services bought by individuals for their own or family use. Goods bought in consumer markets can be categorised in several ways.
Consumer no durables: summary
High volume, low unit value, fast repurchase items.
Eg ready meals, newspaper, hairdressing, any food/drink.
Consumer durables : summary
These have low volume but high unit value.
Often depivided into : a) white goods eg cooker, dishwasher, microwave. b) brown goods eg computer, games console.
The labour market : definition
Market that brings together the buyers of labour, the employers and the sellers of labour, the workers. Ie the labour market is where businesses hire workers.
Different from other markets because there are individuals and households are the suppliers and business organisations are the purchasers.
The labour force : definition
Those in employment plus those who are unemployed but actively seek work. People not counted in the labour force include fullyime students, retired people and people in prisons.
Labour intensive : definition
A business that needs more people and less machine. Eg hairdressing, house building,teaching.
Capital intensive : definition
A business relies on machinery and technology in its transformation of inputs into outputs. Eg car industry, steel production.
Unemployment : definition
Where there are people who are willing and able to work but cannot find employment at the going wage rate. Eg a machine worker who cannot get a job because there are no jobs for machine workers in the area. High unemployment, though it can be bad for local sales, can provide a business with a good source of cheap labour.
Shortage of labour can cause difficulties :
Difficult to recruit new people - prevent business from growing as fast as it wished.
Existing workers may demand higher wages because they know the business will be reluctant to release them.
Competitors try harder to poach the best staff.
The business may have to invest further in staff training and development rather than rely on recruiting new skills into the business.
Geographical mobility : definition
Can they physically get to work? This depends on the transport links as well as people’s desire to move house to get a job.
Occupational mobility : definition
Do they have the skills to do the job? This depends de on the education and training that people have. Even with A levels and GCSEs students will need more training to do many jobs.
It’s important to remember that unemployment :
Unemployment means that Human Resources aren’t being used to produce goods and services to meet peoples needs and wants.
High levels of joblessness have damaging consequences for an economy causing economic and social costs.
Unemployment problems are often bad in local and regional communities and within particular society.
How is unemployment measured ? :
(1) The Claimant Count measure includes people who are eligible to claim the Job Seeker’s Allowance (JSA).
(2) The international Labour Organisation (ILO) measure of unemployment assesses the number of jobless people who want to work, are available to work and are actively seeking employment. (Used internationally so comparisons can be made between countries and enables comparison over time).
Difference between Claimant Count and ILO :
Claimant count only includes people claiming unemployment related welfare benefits.
ILO measure gives a higher figure than the claimant count measure as it includes those who are classified as available for work but who aren’t claiming jobless benefits.
ILO may include students who are actively seeking work but don’t qualify for jobless benefits.
Second earners within a household may be reluctant to claim jobless benefits but would be classified as unemployed under the ILO measure as they’re available for work.
Niche market : definition
A narrow or focused subset of a larger market sector where customers have specific needs and wants.
It addresses a need for a product or service not being met by mainstream providers eg lactose free milk.
Advantages of operating in a niche market :
Less competition (“ignored” by mainstream providers)
Clear focus (as it targets particular customers whic are easier to find and reach)
Builds up specialist skill and knowledge ie. market.
Can often charge higher prices - customer pays for expertise.
Often higher profit margins.
Customers tend to be more loyal.
Disadvantages operating in a niche market :
Lack of economies of scale
Risk of over dependence on a single product or market .
Likely to attract competition of successful
Vulnerable to market changes (lack of spreads risk)
Mass market : definition
Used to describe a broad, non targeted, non segmented market. Products and services produced for mass consumption rather than targeting a specific type of customer. Eg Coca Cola, persil, dove.
Key features of mass market :
Customers for majority of market.
Customer wants are less specific.
Associated with higher production output and capacity.(EOS)
Associated with low cost operation, heavy promotion, widespread distribution or market leading brand.
Advantages of operating in a mass market :
Increases possible number of customers a firm can access and can lead to greater sales and turnover.
Large scale production means lower cost ie EOS and hence higher profit - margins might be low but volume sold means actual profits high.
May create a barrier to entry and shave off competition.
Creates brand awareness and reduces resistance to new products.
Disadvantages of operating in a mass market :
Vulnerable to low cost competition from abroad.
Harder to add value - trying to keep costs down.
High profits could attract other large competitors.
Hard to spot changes in customer needs as market is so large.
Demand : definition
The amount of a product or service that customers are willing and able to buy at a given price.
Can be measured in terms of volume (quantity bought) and or value (value of sales).
Demand : summary
When price falls, quantity demand usually rises.
When price rises, quantity demand usually falls.
Price and quantity demanded are said to be inversely proportional.
* see price/demand graph *
Supply : definition
The quantity of a good or service that producers are willing and able to supply onto a market at a given price in a given time period.
Can be measured in terms of volume (quantity bought) and or value (value of sales).
Supply : summary
For most goods, when price rises the quantity supplied tends to increase.
When price fall, quantity supplied tends to decrease.
Price and quantity supplied are said to be positively related.
* see price/quantity graph*
Price determination : definition
The price at which a good/service is sold is determined by the interaction of demand and supply. The demand curve and supply curve are plotted on the one graph and where they upintersect is equilibrium price.
* see equilibrium point graph*
Disequilibrium: definition
Occurs when (a) excess is demanded or (b) excess supply. *see excess supply and demand graphs*
Conditions of demand : definition
A change in price will cause a change in the quantity demanded of a good and there is a movement along the demand curve. Demand is affected by many factors other than price ie conditions of demand.
Condition of demand : income
An increase in income will increase the demand for normal goods eg branded clothes, nutritious foods. but decrease the demand for inferior goods eg fast food and ready meals.
A decrease in income will decrease the demand for normal goods, but increase the demand for inferior goods.
Eg inexpensive foods : ready meals as supposed to fruit and veg.
Condition of demand : price of related goods.
Decrease in the price of a complementary good will increase the demand for a product. Eg tennis ball and tennis racket.
Increase in the price of a substitute good will increase the demand for a product. Eg coke and Pepsi
Increase in price of a complementary good will decrease the demand for a product.
Decrease in the price of a substitute good will decrease the demand for a product
Complementary goods : camera and film, printer and ink.
Substitute goods : apple and Samsung, Cadbury and galaxy.
Conditions of demand : tastes and fashion
If a product becomes fashionable, demand will increase, if tastes change and the good becomes unfashionable, demand will decrease.
Conditions of demand : advertising
Can cause demand to increase. Negative rumours or scare stories can cause demand to decrease.
Conditions of demand : government policy
Changes to legislation can affect demand eg introduction of sugar tax.
Changes on tax and interest rates can also affect the demand for housing and wide range of other products.
Conditions of demand : population
A rise in population will increase the demand for most products. Changes in age structure of a population can also affect demand. Eg baby clothes
Conditions of demand : expectations of future prices
If people expect the price of a product eg oil to increase in the future they will increase demand now.
If they expect future price reductions, they will decrease their demand now.
Supply : price relationship
Change in price will cause a change in quantity supplied ie movement along the supply curve. Depends on a range of factors other than price, known as conditions of supply and cause curve to SHIFT.
Increase in supply ——> shift to right
Decrease in supply ——> shift to left
Any thing increasing cost of production decreases supply and anything decreasing cost of production will increase supply.
Conditions of supply : cost of factors of production
If raw materials or wages increase, supply will decrease.
If cost of materials or wages decrease, supply will increase.
Conditions of supply : productivity of factors of production
Increase in labour productivity, increase supply.
Reduction of output per worker, decrease supply.
Conditions of supply : indirect tax
Ie VAT will decrease supply.
Subsidies that reduce costs of production, increase supply.
Conditions of supply : technological advances
Increase in advances, increase supply.
Breakdown of advances, decrease supply.
Conditions of supply: natural factors
Ie weather can affect supply of agricultural products.
