Project 1 Task 2

Voluntary Exchange

Buyers buy a product that they perceive has value while sellers earn revenue through selling their products

Market Definition

Any physical or virtual place where sellers (businesses) interact with buyers (customers)

Supply

The different quantity of goods or products a seller has to sell at different prices

Demand

The different quantities of goods or products buyers want to purchase at different prices; how strong buyers’ desires are to buy a certain product or good

Equilibrium Price

The price at which buyers and sellers agree a product is worth; seller seeks higher prices while buyers seek lower prices

Competitive Advantage

The ability to outperform rivals in the same market and gain higher revenue

3 ways markets vary in competitiveness

1. Number of rival businesses or products offerings

2. Differentiated products or products with distinguishing features

3. The extent to which rivals offer similar products at a lower price

Product Offerings

How many distinct types of goods or services are available to consumers in a market

5 ways businesses might attempt to showcase their products’ superiority

1. Higher quality

2. Lower prices

3. More effective marketing

4. Unique product feature

5. Better customer service

Monopoly

A market where only one businesses produces a unique good or service and there is no competition; this can be through horizontal integration and vertical integration

Horizontal Integration

Buying companies or pushing companies out of business that are in the same market or industry at the same supply chain stage as your company; Ex: One oil refinery buying another oil refinery

Vertical Integration

One business has control of all the stages of its supply chain from the extraction or raw materials to selling the product; Ex: an oil refinery buying drilling rigs and gas stations

Barriers to Entry

Obstacles that make it difficult for new businesses to enter a market

5 Barriers to Entry

1. Intellectual Property Rights

2. Regulations to Limit Rivals

3. Limited Access to Resource Suppliers

4. High Startup Costs

5. Low Prices

3 Types of Intellectual Property Rights

1. Patents

2. Trademarks

3. Copyrights

Patents

Exclusive right granted for an invention that provides owners with legal protection

Trademarks

Symbols or words legally registered or established by use as representing a company or product

Copyrights

Protects original works of authorship (person who writes, creates, or originates a piece of writing, art, music, or an idea) as soon as the author fixes the work into a tangible form of expression