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Business and Economics AS - How businesses respond to their market

1. The nature of markets
a. Economic systems
i. Command Economic System
- A command system relies on planners, directed by government
to decide what and how to produce. Command economies were
characterised by low living standards and inflexibilities.…

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c. Scarcity and choice
i. Scarcity
- In all economies individual needs and wants always exceed the
availability of resources to provide them. Choices must be made
ii. Choice
- Involves deciding on priorities in the light of what can be
afforded. Consumers' choices are based on what can be…

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- Is the money amount paid by the buyer to the seller in a
transaction. This is often set by market forces but can sometimes
by regulated by governments.
b. Demand curve
i. Demand curve
- A graphical representation of the relationship between
quantity demanded and price, for a product…

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a. Equilibrium
i. Equilibrium price
- The price at which quantity supplied and quantity demanded
are equal in a market, leaving neither excess supply nor excess
in demand
ii. Market clearing
- Obtaining a balance between quantity supplied and quantity
demanded, normally by arriving at the equilibrium price.
b. Changes…

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6. Purpose of marketing in changing markets
a. Dynamic markets
b. Why does market share matter?
i. Market share
- The share of sales in a market which one business or brand has.
Market share is normally expressed in percentage terms.
ii. Non-price competition
- Includes all possible inducements to…

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ii. Price
- Can be key feature of competitive advantage. A price cut may
increase sales substantially.
iii. Brands
- identify a product or its packaging in such a way that it is clearly
differentiated from competing products
iv. Brand loyalty
- May be achieved if the distinguishing factures of…

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is persuasive advertising. It is particularly criticised when aimed
at children or promoting unhealthy/harmful products.

7. Marketing ethics
a. Truth in advertising
b. Consumer sovereignty
i. Corporate social responsibility
- Accepting that organisations must take account of their impacts
on the community and environment, show consideration and
behave ethically. Accepting…

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Economics and Business - How does market structure affect business?



8. How does competition affect the market
a. Competition
b. Competitive markets, prices and costs
c. Competitive markets and easy entry
i. Homogeneous products
- Identical to one another. It is impossible to distinguish one
producer's output from another's. They…

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i. X-inefficiency
-Occurs where there is weak control of costs and resource use
and no competition to provide the incentive to stimulate
efficiency. X-inefficiency has been found in both public and
private sector organisations. Privatisation has made
x-inefficiency much less likely to be a problem.
k. Restricting supply

9. Different…

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- Are leading firms in the industry with sufficient market power
to decide between restricting output and charging high prices,
or reducing prices in order to increase sales. A brand or producer
may be in a powerful position where rivals will set their prices in
line with the price leaders.…

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