The market

This includes discriptions about the market and how they are affected by supply and demand. I apologise that it couldn't be in revision card form but the diagrams that were necessary for this unit couldn't be put in. Hope this helps anyway (also most of the diagrams were done in paint so they may look a bit messy)

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The market place
A marketplace is where buyers meet sellers. The key elements within every market are its
size (how much is spent by customers in a year), the extent to which it can be subdivided (e.g.
confectionary market into chocolate, sugar based sweets, chewing gum), and the extent to
which the market is dominated by one or two companies or brands.
Types of market
Local vs. market
Most new small firms know and care little about the size of the national market. If you
have just brought an Ice cream that you intend to operate in Chester, it doesn't matter whether
the size of the market for ice cream is £500 million or £600 million a year. Your concern is the
level of demand and the level of competition locally (you will probably be delighted if you
achieve annual sales of £100,000)
In the case of the market for ice cream in Chester there are several things to consider:
How do locals buy ice cream at the moment? (multipacks from supermarkets?
Individual cones from ice cream stalls or vans)
How many tourists come to the city? Do they come all year round? What type of ice
cream so they buy? Where do they buy it?
How much competition is there? What do competitors offer and charge at the moment?
Are there gaps in the market that you can move into
Other firms are focused more on the national market. To deal on a national market a
company has to deal professionally with the supermarket buyers, and produce eyecatching
packaging that can compete effectively with that of national and multinational competitors.
Physical and electronic (virtual)
All markets used to be physical. The London stock exchange was a place where buyers met
sellers and facetoface agreements took place. Similarly, auctions where physical with bidders
having to catch the eye of the auctioneer.
Today an increasing number of markets are electronic. The stock market sexists only on
computer screens and the likes of EBay are transforming auction and other markets worldwide.
The key factors of an electronic market are:
They are fiercely price competitive, so the companies supplying services have huge
pressure to keep their costs as low as possible
They do not rely on physical location
The market is easy and quite cheap to enter, so how competitors can arrive at any time

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They produce a long tail of competitive, profitable small businesses, able to carve their
own little niche in markets this is very difficult to achieve in the high street, where rents
are so high that only big firms can afford them
Demand is the desire of consumers to buy a product or service when backed by the
ability to pay.…read more

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The British economy grows at 2.5% a year. This means that average income levels double
every 30 years. Economic growth means we all get richer over time
The demand for most products and services grow as the economy grows. Goods like
cars and cinema tickets are normal goods, for which demand rises broadly in line with incomes.
In some cases it grows faster. This type of product is known as a luxury good.…read more

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Usually firms will be willing to supply more as the price increase. This is because they make
more profit on each unit sold.…read more

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The equilibrium price is the point on the supply and demand curve where the demand=supply.
Equilibrium point will
be when supply is equal to
the price (P1)
If a price us set
below the equilibrium then
less will be supplied and
demand will rise. This will
lead to excess demand. (P3)
IF the price is set
above the equilibrium price
then more will be supplied at
that price and demand will
fall.…read more


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