Theme 1 Key Formula

  • Created by: HULKSMASH
  • Created on: 29-10-19 07:26

Chapter 1

Market Share:

Sales of a business/ Total sales in the market   x 100%

- This indicates a market leader.

- Influence other companies to follow the leader.

- Influence the leader to maintain position.

- Business with a small market share may set a target of increasing its hare by 5 per cent over a period of time.

- Indication of the sucess or failure of a business or its strategy.

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Chapter 6/7

Total Revenue or Total Expenditure:

Total Revenue = Price x Quantity 

Price Elasticity of Demand= % change in quantity demanded/ % change in price

  • Price elasticty is less than 1 demand is said to be price inelastic.
  • Note that the minus sign is not used to determine whether goods are price elastic or price inelastic.
  • It is enough to focus on the numerical value.
  • Influencing factors: Time, Competition for the same product, Branding, The proportion of income spent on a product, Product types vs product of an individual business.
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Chapter 8

Calculation of Income Elasticity of demand:

Income elastcity of demand = % change in quantity of demanded / % change in income

  • If the value of income elasticity is greater than 1, demand is said to be income elastic.
  • If the value of income elasticity of demand is less than 1, demand is said to become inelastic.
  • Can show if goods are inferior or normal goods.
  • Normal goods, an increase in income results in an increase in demand, the value of income elasticity will be postive(+). 
  • Inferior goods, increase in income elasticity will be negative (-)
  • Influencing factors: necassities, luxaries
  • Significance of income elasticity of demand for a business: Business selling goods with high income elasticity, business selling goods with low income elasticity, production planning, Product switching.
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Chapter 11

Price = unit cost + (mark-up x unit cost) 

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