Miss Blackwell Half Term 1 Flashcards
Demand
The amount of a good or service that customers are willing and able to buy at any given price
Supply
The amount of a good or service that selleres are willing and able to sell at any given price
Equilibrium price
Situation in a market where demand is equal to supply
When there is excess demand in a market
Price = increase Supply = increase
When there is excess supply in a market
Price = decrease
Quantity demanded = increase
What are market forces
Supply and demand factors
Factors of demand
- Price
- Income
- Wealth
- Advertising/PR
- Taste and fashion
- Demographic change
- Government action
- Price of other products
Income
Money received from employment
Wealth
Value of a persons total assets
Advertising
Exposing
Taste and fashion
General trends
Demographic
Characteristics of a human population
Government action examples
Tax
Subsidies
Tax
An amount of money paid to the government
Subsidy
Payment from government to business to incentivise supply of a product or service
Substitutes
An alternative product serving the same purpose
Complement
A product bought in conjunction with another
Supply factors
- Price
- Costs
- Taxes
- Subsidies
- Price of other products
Elasticity of demand
Measure how sensitive QD is to a change in price
Elastic
Demand is sensitive to a change in price (luxuries)
Inelastic
Demand is not sensitive to a change in price (necessities-petrol)
Competition
Rivalry amongst sellers
Market
Situation where buyers and sellers are in contact
Physical markets with advantage
Shops
Provide personalisation
Non physical markets and advantage
E commerce
Provide convenience
Market price
Price range/ typical price of a product in a market at which consumers are prepared to pay
Mark up
Profit for one item
Revenue
Money made from sales
Competitive market
Market characterised by many sellers
Competitive market characteristics
Many firms
Usually low prices
Eg foreign exchange
Monopoly
Market dominated by one seller (25%)
Monopoly characteristics
Few firms
Often high prices (although dominating firms may achieve economies of scale)
Eg supermarkets
Oligopoly
Market dominated by a few firms
Eg mobile phone operators
Non price differences
Similar and quite high prices (collusion)
Collusion
When rival companies cooperate for their mutual benefit
Monopolistic competition
A market structure with many competitive firms, each of whom supplies a slightly differentiated product at a similar price
Monopolistic competition example
Taxi businesses
Market size
The collective value of goods and services that buyers purchase
Market growth
The percentage growth of the size of the market
Measured over a specific time period
Market share
The percentage of total sales that a business has in a specified market
Ways to increase market share
- be aware of and meet customer demands
- sell more (advertise)
- find out why you’ve lost customers
- have clear marketing plan
- use variety of marketing techniques (pricing, advertising, promotion)
- merge/acquire competitor
Barriers to entry
Factors that would prevent a firm from entering and/or competing in a market
Examples of barriers to entry
- Large start up costs
- Need to break customer loyalties
- Inability to gain economies of scale
- Price war from existing businesses
- Legal restriction such as patent
Patent
Someone can’t copy your idea/design
Market power
Ability of a firm to influence or control the terms and conditions on which foods are bought and sold
Effect of market power on barriers to entry
Barriers to entry decrease or increase as market power does
Eg monopoly would have lots of power thus a high barrier to entry
Barriers to exit
Factors preventing a firm from leaving a market
Examples of barriers to exit
- Redundancy payments
- Difficulty selling off capital
- Contracts with suppliers
Market dominance
A measure of market share compared to competitors
2 examples of external growth
Merger
Acquisition
Merger
Where 2 companies join together and form a larger business
Acquisition
Control of another company is achieved by buying a majority of its shares
Disadvantages of external growth
- Diseconomies of scale due to size (communication problems)
- Redundancies
- Higher prices (customers)
Regulating body in UK
CMA (competition markets authority)
What can the CMA investigate and stop
Dominance
Anti-competitive practices
Mergers
Acquisitions
What other regulating body has power to stop markers and acquisitions in the UK
European regulating body
What the CMA does
Work to promote competition and make markets operate to benefit consumers, businesses and the economy equally
Responsibilities of the CMA
- Investigate mergers that may restrict competition
- Conduct market investigations where anti-competitiveness may be occurring
- Investigate breaches of UK or EU prohibitions against anti-competitive agreements and abuse of dominant positions
Sanctions the CMA can enforce
- Fine business up to 10% of turnover
- Customers and competitions can sue, if anti-competitive
- Individuals can be disqualified from being company director
- Fine individual (director) if they fail to comply when info is requested in investigation
What do separate regulating bodies exist for
Former nationalised industries (gas, electricity, water, railways, telecoms)
