Markets and Market Forces
- Created by: b.ethbuchanan
- Created on: 08-12-15 10:10
Definition of market
A place where buyers and sellers come together to exchange goods and services
Commodity Market
- Involves the trade of raw materials which can later be transformed into finished products
- Traded on exchanged commodities
- A future (special contract) is used to purchase commodities
- These are agreements to sell a fixed quantity of a commodity at a future date for a pre-determined price
Consumer market
- A market for finished consumer goods
- Consumables/non durables e.g. food and clothing
- Consumer durables e.g. banking, broadband
Capital Goods Market
- Used in the production of finished products but not incorporated in the finished products
- e.g. bricks, tools
Industrial Market
- Goods used by industry in the production of other goods AND are incorporated in the finished product
- e.g airplane seats
Labour Market
- The market brings together the buyers and sellers of labour
- Individuals will supply firms as long as there is a reward for doing so (wages)
Labour force
- Includes those unemployes and those unemplyed but actively seeking work
Unemployment
- Thsose who are registered able and available and willing to work at the going wage rate in any suitable job but can't find any employment
- Two main counts of unemployment in the UK are the claimant count and the labour force survey
The claimant count
- Only counts those who are out of work and claiming unemplyment benefits
- Doesnt incluse married women with working husbands, those on sickness and incapcity benefits, under 18, people on training schemes
- For this reason this measure can be seen as an inaccurate measure of unemployment
The ILO measure
- Has been established since 1998
- Covers those without a job who have looked for work in the past months and are able to start work in 2 weeks
- It's an international standard which makes comparisons between countries easier
- Usually much larger than the claimant count measure.
Niche Marketing
- Where a business targets a smaller segment of a larger market where customers have specific needs and wants
Advantages of Niche Marketing
- Less competition
- Clear focus
- Builds up specialised knowledge and skill
- Profit margins tend to be higher
- Customers tend to be loyal
Disadvantages of Niche Marketing
- The growth of the firm depends on growth of the market
- Not able to make use of economies of scale
- Large firms may react aggressively if they enter the mass market
Mass Marketing
- Where a business sells to the largets part of the market where there are many similar products on offer
Demand
- Demand is the quantity of a good or service a consumer is willing and able to buy at a given price in a given time period
- It is expected that demand will increase with decrease in price
- The theory of demand deals with how a customer behaves if they are forced to deal with a change in price for a good of service
Relationship between price and quantity - Demand
- The demand curve for a good or service is downward sloping from left to right.
- As price increases consumers demand less and vice versa
Supply
- The quantity of a good or service that producers are willing and able to supply onto a market at a given price in a given time period.
- For most goods it's expected the quantity wil increase when prices increase
- As the price of a good increases producers shift resources to the production of that good
Relationship between price and quantity - supply
- The supply curve for a good or service is upward sloping from left to right. As price increases quantity supplied by firms increases and vice versa.
Conditions of demand
income
- For normal goods demand wil rise as income increases
- E.g new cars or clothes
the price of related goods
- Complements - sometimes goods are demanded jointly and when the demand for one increases the other will fall
tastes in fashion
- Whenever products become fashionable demand will increase
advertising
- An effective advertising campaign can significantly increase the demand for a product to increase at every price level
government policy
- changes to legisltion
- changes in income tax and intrest rates
population
- As population increases demand for most products will increase
expected price changes
- oil in winter
Conditions of supply
- Price of the factors of production for example the cost of labour
The
factors of production
C ell
Enterprise
Land
Labour
- The productivity of the factors of production
- indirect taxes
- Technological advances
- natural resources
Price determination
- The price at which a good or service is sold is determined by the interaction of demand for the good or service and the supply of the good or service.
Equilibrium
- The equilibrium price is that where the quantity demanded is equal to quantity supplied
Disequilibrium
- Disqequilibrium occurs when a situation of excess demand arises
- Also occurs when there is a situation of excess supply
Price elascisity of demand
A measure of how demand for goods responds to a change in price
CALCULATED BY:
Demand Dinner
______ or _______
Price Plate
PED less than one
A ped of less than one means that the product is price inelastic or that the percentage change in quantity demanded is less than he change in price or that the business can afford increase the price without causing signifigant decreases in demand
PED greater than one
PED greater than one means a product is price elastic. Or that the change in quantity demanded is greater than the change of price. The business cannot afford to increase the price without causing signifigant decreases in demand.
How can a business use PED
To forecast the effect of a price change on sales and evaluate if a price change is wise
Strategies avaibale to reduce price elasticity
- Have a strong usp
- Merge or takeover a rival
- increase the strength of the brand
- Extensive advertising
- Strong product differentiation
Factors that affect price elasticity
- How essential it is
- If there are alternatives
- the market it's aimed at
- how important cash is to them
How does a company go about calculating PED
- Market research
- test market at a particular price
- observe activity of competitors
- Use past data to forecast demand
the difficulties of calculating PED
- People don't always say what they say they will
- Test market might be peculiar
- Activity of competitors might not relate
- the business can only estimate
Related discussions on The Student Room
- Durham or ESCP? »
- Economics a level »
- Marketing or business management and admin degree »
- economic 25 marker »
- Cranfield School of Management Vs. Birmingham Business School »
- Need help with some Alevel business multiple choice question »
- Career »
- Market structures help »
- Organisation Psychology versus Social Psychology »
- Organisation Psychology versus Social Psychology »
Comments
No comments have yet been made