Week 5- Understanding Markets Flashcards
What three dimensions does every industry and market have?
time, product and geographic
what type of factors caused shifts in the demand curve?
uncontrollable and controllable
what are uncontrollable factors?
affects demand and is out of companies control eg. Incomes, weather, interests, prices of substitutes
what are controllable factors?
affects demand but can be controlled by a company eg. price, advertising, warranties, product quality, distribution
Explain how uncontrollable and controllable factors cause shifts in demand?
Depending on the factors, at the same price, more/less quantity is demanded
Explain what the supply curve shows
relates the price of a product to the quantity supplied by sellers
What are the two reasons why supply curves slope upwards?
1) scarcity
2) high competition
explain why scarcity causes supply curves to slope upwards
If demand is high but supply is low then demand will increase as prices increase
explain why high competition causes supply curves to slope upwards
High competition causes prices to fall as each firm is competing on price. Less efficient firms are prevented from entering the market so only the best firms survive
what is the market equilibrium?
the price at which quantity supplied equals quantity demanded
At the equilibrium price is there pressure for the price to change?
no, because the quantity demanded and supplied is equal
what is a price taker?
firms that don’t have significant power in a market so have to set their prices at the prices of bigger competitors. Many firms fail to realise this
if a factor other than price (like incomes) changes then how do we describe the change in the demand curve?
It will of either increased or decreased
