markets - business paper 1

eduqas a level business

define market and competition

market: is where buyers and sellers interact to exchange goods and/or services.

Competition: occurs when businesses compete with each other to attract customers and increase sales/profit. businesses may compete through : quality, price, branding, customer service ext

what are the different types of markets and their characteristics (there is 7)

1)Local market: a market operating within a relatively small geographical area. Characteristics are-relatively small customer base, customers may value convenience, competition is often from other nearby businesses

2)Global market : A market in which businesses sell to customers across national borders. Characteristics are- potentially very large customer base, increased potential sales, greater competition, exposure to different cultures and consumer preferences

3)Mass market: targets a large proportion of the market with products aimed at broad consumer demand. characteristics-large potential customer base, high sales volumes, products may be highly standardised

4)niche market: a relatively small, specialised segment of a larger market. Characteristics- specific customer needs, products can be highly specialised, potentially less direct competition, customers may be willing to pay a higher price

5)Consumer market: A market where businesses sell goods/services to final consumers for personal use.

6)Trade market :market where goods/services are sold between businesses

7)Product market : market involving physical/tangible goods.

8)Service market :A market involving the provision of intangible activities or experiences.

7)seasonal market: experiences significant changes in demand depending on the time of year.

what is market size, market share ,and market trends and the importance to a business

Market size is the total value or volume(number of units sold) of sales within a particular market. Market size by value = total sales revenue in the market

Importance of market size: A large market may offer greater potential sales, attract more businesses or provide opportunities for economies of scale whereas a small market may limit sales potential, reduce economies of scale or be less attractive to large businesses

Market share: the percentage of total market sales accounted for by one business. formula: Market share = business sales ÷ total market sales × 100

Importance : A high market share may indicate: strong competitive position, strong brand/customer loyalty and potential economies of scale

market trend: general pattern or direction in which a market is changing over time. The importance is to identify opportunities, identify threats, develop new products, allocate resources

define market segmentation and explain different ways markets can be segmented

Market segmentation: process of dividing a market into groups of consumers with similar characteristics, needs or behaviours.

methods of market segmentation: Geographic segmentation (dividing customers according to location.) Demographic segmentation(Dividing customers according to characteristics such as age, gender, income and family size)Behavioural segmentation(Dividing customers according to how they behave towards a product/service.)

what is the importance and impact of segmentation to a business and its customers

Benefits to businesses: better targeting, Product development, Increased customer satisfaction, Potentially higher sales and profit, Competitive advantage, More efficient use of resources

Drawbacks/risks :Increased costs, Smaller target market, Changing consumer preferences, Competitor response

Impact on customers: Positive: products more closely match needs, greater choice, more relevant advertising, potentially better customer experience. Negative: higher prices for specialised products, targeted marketing may encourage unnecessary purchases, some consumers may be excluded from particular products/services

what are the 4 market structures and what do their competition affect

4 market structures : perfect competition , monopolistic competition , oligopoly and monopoly

their competition affects: pricing power, profit, efficiency, innovation, advertising, product choice and barriers to entry

Explain the features of perfect competition, monopolistic competition, oligopoly and monopoly and their impact on business behaviour

Perfect competition: A market structure with an extremely high degree of competition. Features : large number of buyers/sellers, Identical products, low barriers to entry/exit, Perfect information, Firms are price takers. impact on business behaviour: Businesses have little control over price and must compete primarily through efficiency.

Monopolistic competition: A market with many businesses selling differentiated products. Feature: Many firms, Product differentiation, Relatively low barriers to entry, Some control over price, Strong competition

Oligopoly: A market dominated by a small number of large firms. Features: Few dominant firms, High barriers to entry, Products may be similar or differentiated, Strong interdependence, Significant price/non-price competition

Monopoly: A market where one firm dominates, theoretically a single supplier. Features: One dominant business, Very high barriers to entry, High market power, Significant control over price

explain why consumers sometimes need protection from exploitation from businesses

consumers may need protection as businesses can possess more knowledge , info, expertise and bargaining power

Risks of exploitation: misleading advertising, unsafe products, poor quality, inaccurate information, excessive pricing

Importance of consumer protection: increases consumer confidence, improves safety, encourages fair competition

Explain what is meant by demand, supply and equilibrium

demand : quantity of a good/service consumers are willing and able to buy at a given price over a given period.

supply: Supply quantity of a good/service producers are willing and able to sell at a given price over a given period.

equilibrium : where demand = supply

Explain the factors that lead to a change in demand and supply

factors changing demand : income , taxes, advertising , prices of substitutes and compliments , fashion changes

factors affecting supply: cost of production , technology, corporation taxes , subsidies , weather , availability of resources

what is PED and YED

PED: measures how responsive quantity is to a change in price(formula : % change in quantity demanded / % in price) Elastic demand(1<x): A small price change causes a relatively large change in quantity demanded. inelastic demand(x<1): A price change causes a relatively small change in quantity demanded

Factors affecting PED: substitutes, necessity vs luxury , income , brand loyalty

YED: measures how responsive demand is to changes in consumer income.(formula: % change in demand / % change in income)

define inferior, normal and luxury goods

Inferior goods

Income ↑ → demand ↓

Consumers may switch to higher-quality alternatives as income increases.

Normal goods

Income ↑ → demand ↑

Luxury goods

Demand increases more than proportionately when income rises.

Therefore luxury goods are particularly sensitive to changes in consumer income.