Unit 3- External Influences

Question 1

Demand

Answer 1

The amount of a good/service that customers are willing and able to buy at any given price.

Question 2

Supply

Answer 2

The amount of a good/service that sellers are willing and able to sell at any given price.

Question 3

Mark-up

Answer 3

The difference between the selling price of a good/service and the cost.

Question 4

Equilibrium Price

Answer 4

The situation in a market where demand is equal to supply, E.G both parties are happy.
In theory, customers can buy what they want and shops have no unsold stock.

Question 5

Price

Answer 5

The amount that a customer is willing and able to pay.

Question 6

Cost

Answer 6

The amount spent by a business making/supplying/buying in the product.

Question 7

Wealth

Answer 7

A value of assets.

Question 8

Factors

Answer 8

Determinants

Question 9

Tax

Answer 9

Money that is paid to the government, it is a compulsory financial charge.

Question 10

Subsidies

Answer 10

Money (financial aid) or support granted by the government to help an industry, individual or business to typically remove some type of burden and often is in the overall interest of the public.

Question 11

Elasticity of demand

Answer 11

It measures how sensitive or responsive quantity demanded is to a change in price, it measures how much demand changes when a price change occurs on essential/inessential products.

Question 12

Inelastic demand

Answer 12

The quantity demanded is unresponsive/insensitive to change in price. It has a steep curve.

Question 13

Elastic demand

Answer 13

The quantity demanded is sensitive/responsive to a change in price. It has a flatter curve.

Question 14

Market forces

Answer 14

Factors of supply and demand, it also means the same as determinants of supply and demand.

Question 15

Competition

Answer 15

Rivalry amongst sellers.

Question 16

Market

Answer 16

Any situation where buyers and sellers are in contact in order to establish price.

Question 17

Competitive market

Answer 17

A market in which there are a large number of sellers (many). Businesses in these markets compete mainly upon price. There is a range of prices, usually the lower end and products are usually good quality.
E.G farming + currency exchange services.

Question 18

Monopoly

Answer 18

A market dominated by one seller (major). In reality, CMA describe it as any firm with more than 25% of the industries sales (market share). The prices are often high but the products are usually lower quality. E.G Tesco.

Question 19

Economies of scale

Answer 19

Arise when unit costs fall as output rises, meaning it is cheaper to make one product.

Question 20

Unit costs

Answer 20

The average cost per unit produced - how much it costs to make one product.

Question 21

Oligopoly

Answer 21

A market structure that is not very competitive, they exists where a market is dominated by a few firms. The prices and products are similar so compete on non-price differences. E.G car manufacturers and television.

Question 22

Monopolistic competition

Answer 22

A market structure with many competing firms each of whom supplies a slightly differentiated product. The prices are similar so compete on non-price differences like an oligopoly. E.G a taxi service or hairdresser.

Question 23

Market size

Answer 23

Expressed as the collective value of the goods/services that buyers produce.

Question 24

Market growth

Answer 24

The percentage change in the size of the market, measured over a specific period.

Question 25

Market share

Answer 25

The percentage of total sales (by value) that a business has in a specified market.

Question 26

Dynamic

Answer 26

Refers to a continuously changing situation.

Question 27

What are the determinants of supply?

Answer 27

• Price (Price goes up, supply goes up)
• Costs (costs go up, supply goes down, vice versa - buy more with same budget)
• Taxes (Taxes increase, supply decreases)
• Subsidies (Business with subsidies supply more)
• Price of other products (competitive supply-fall in price decreases supply of one product, but a price stays the same for another then supply will increase = more profitable)

Question 28

What are the determinants of demand?

Answer 28

• Price (price decreases, demand increases - movement along demand curve)
• Income (increase, shifts to right, decrease shift to left)
• Wealth (increase shifts right, decrease shift left)
• Advertising, promotional offers + public relations
• Taste and fashion
• Demographic changes (population)
• Government action
• The price of other products - substitutes + complements.