Unit 3 Flashcards
What’s the equation for market share
Total sales/market size by value or volume
How do u calculate market size
Total sales/market share x100
What is perfect competition
Many firms with similar products competing to meet wants and needs of customers
What is a monopoly
A business who has 25% or more market share
Who are the people that make sure firms are treating consumers fairly
Competition and markets authority
What’s oligopoly
Few large firms dominating
What’s effective demand?
The quantity that people in a particular market can and will purchase at a certain price.
What is the equilibrium price.
The price consumers demand coincides with what businesses are prepared to supply
What happens when the demand is lower than the supply
The price is reduced as there are unsold stocks of goods. This creates a greater demand as the price is pulled down to the equilibrium
What happens when the supply is lower than the demand?
Shops increase their prices as consumers are prepared to pay more. Demand is pushed up towards equilibrium
What are some determinants of demand?
Price
Income
Government changes
Taste and fashion
What are some determinants of supply
Price
Cost
Taxes and subsidies
External shocks
What moves a consumer along a demand curve
ONLY PRICE. All other determinants move left or right
Price stays Same but more or less is determined at every price level.
What are Inferior goods
Demand goes down for certain goods when income rises e.g budget goods
What are normal goods
Demand goes up for certain goods when income rises
What’s price elasticity
How responsive demand is to a change in price
What is elastic?
When the change in demand that results from a price change is greater than the change in price that caused it
What is inelastic
When the change in demand that results from a price change is lower than the change in price that caused it
What happens when a product is inelastic?
Able to charge more and still similar demand. Firms revenue Will rise e.g. petrol
What happens when a product is elastic
Price goes up, demand decreases
Firms revenue Will decrease
What makes a product inelastic
Few substitutes
Cost of buying the product in proportion to the consumers income is small
What are some negative instances where stakeholders don’t benefit from competition within a market
Employees- competitive pressure to keep costs down= may negatively impact wages, hours, overtime payments
Suppliers- may be offered a “take it or leave it” approach to the conditions of supply and payment.
Shareholders- little market power, little control over prices= dividends relatively low
What are barriers to entry
They factors tgat could prevent a business from entering and competing in a market
E.g large start up costs
Legal restrictions
Inability to gain eos
Price wars from other bus. In market
What are barriers to exit?
The factors that could prevent a business from leaving a market even if it would like to.
E.g.
contracts with suppliers
High redundancy costs- employees entitled if worked for 2 years+
Difficulty of selling capital
What is organic growth
Achieved by increasing sales.
What is inorganic growth
Mergers or acquisitions
What are mergers?
2 companies joining together to form 1. Buying majority of 1 shares. Creates a new brand entity.
What are acquisitions
2 bus, merging to form 1. Buying shares. But still have sepetate entity’s.
What makes a product elastic
Lots of substitutes
Location of shop
What is the price elasticity of demand
The responsiveness of demand for a product to a change in its price
What is the equation for price elasticity
% change in quantity demanded/ % change in price
Elastic 1<
Inelastic 1>
What’s the equation for income elasticity of demand
% change in quantity demanded/ % change in income
What does the EU aim to do
Aims to improve the standard of living of their citizens by
Cresting large market
Generating economic + political stability
Achieving balanced economic growth
Protecting all ur citizens
What does the single market mean
Makes easier to trade, creates wealth and jobs . Can trade freely with common regulations
What trade barriers do countries have
Quota- restrict number of imports allowed
Tariffs- tax goods entering from abroad
What is the aim of the single market
To remove trade barriers. It has harmonisation of specifications, safety standards and testing= less cost
Harmonisation of qualifications
Financial restrictions abolished
What are the advs of the uk businesses joining the euro
Easier to compare prices
Less uncertainty of costs + profits
Would encourage trade- no commission for buying or selling euros.
What are the disadvs of uk joining the euro
Loss of control over monetary policy. Uk can’t control their interest rate anymore
Wealthier countries would only make decisions that benefit them
What is globalisation
Growth in world markets through a process of integration where it is possible to trade in a global market
What can globalisation lead to?
Companies- tnc
Economies of scale
What is trade liberalisation
Process where international trade becomes easier as there is a relaxation of rules
What restrictions do govs put on imports
Embargoes- total ban
Quotas- fixed quantity allowed to be imported
What are the ADvs of globalisation
Investment jobs and training all around the world
News and ideas spread quickly
LICs have potential to develop
What are the disadvs of globalisation
Mostly for HICS
Workers exploited in lics
Jobs can be taken in hics
Opps of globalisation
Larger markets and low production costs
Can take adv of tech around world
Threats of globalisation?
Competition
What are emerging markets
NEEs achieving rapid growth and industrialisation
Business want to grow in emerging markets as they can become a known brand where the large pops r just starting to have discretionary income.
What is international trade
Exchange of capital, goods and services across the borders of diff countries
What are the benefits of trade
Variety of products
Economic efficiency
Access to mills o customers
Countries can specialise in what they do best in.
Why are there trade barriers in some countries
Protect own industries
Foreign competition can lead to unemployment
What are trade blocs?
Group of counties in similar area that protect themselves from imports from non members
What is a preferential trade bloc
Members lower but don’t eliminate barriers among themselves
They have their own policies with non-members
What is a free trade area trade bloc
Members eliminate internal barriers
All agree on common policies on external barriers
What is a customs union trade bloc
Eliminate internal barriers goods only
Common policies with external barriers
What is a common market?
Eliminate internal barriers + comm pols with external.
Free movement of goods and people
What is an economic union trade bloc
Elim in. Barriers
Same pols with ex barriers
Free move of goods, people and uniform set of economic policies
What is full integration trade bloc
Everything the same e.g USA
What is the WTO
World trade organisation . Try to settle trade disputes + keep peace
What are the benefits of trade blocs
Acc big market
Tariffs removed- cheaper components
Eos potential
Stability bus. No longer has sales all in one area
What are the disadvs of trade blocs
Have to stick to rules and regs.
Hinder trade with non members
Competition may be too big for other bus. In the bloc
What is the exchange rate
The value of one currency in terms of another
What is a strong pound
Get more foreign currency for the pound
What is hot money
Money that flows from country to country in search of highest interest rate
How is a business affected by growth of eu
Taken adv of migrant workers
Production in newer members countries
How are businesses affected by central gov
Depending on political persuasion of party- may make rules
Depending on state of economy
Cma- competition markets authority- regulate markets so there’s no dominating business
What is privatisation
Act of passing ownership from the public to private sectors by selling shares in the businesses
E.g British rail
Northumbrian water
Gas companies
