markets

Question 1

define a market.

Answer 1

any place where potential buyers and sellers interact in order to carry out a transaction. this means that the seller offers goods and/or services to the buyer in exchange for a particular value, most often being money.

Question 2

a market can be a…

Answer 2

physical space or a virtual market.

Question 3

what are the two different kinds of markets and what do they equal?

Answer 3

1) markets for factors of production
+
2) markets for goods and services
=
3) markets in the business world

Question 4

within the market for factors of production, we get three different kinds, name and explain them.

Answer 4

1) Labour market: workers offer their services to employees to earn salaries and wages. the employer is looking to hire workers best suited for the job.

2) Capital/ Financial market: money is saved by one group of people and later lent out to another group of people.

3) Raw Materials: water, minerals, wood, fish, crops, farm animals that are slaughtered for meat.

Question 5

how does the bank make money?

Answer 5

1) when someone saves their money, the bank will pay the person interest
2) will lend out money to someone else and charge interest. the difference between the two is how the bank

Question 6

in what categories can goods and services be divided into?

Answer 6

1) physical goods: products we can see and touch
2) intangible services: rendered to earn money

Question 7

how can markets be classified?

Answer 7

1) place
2) time
3) competition
4) legal vs illegal

Question 8

give a description of legal vs illegal businesses.

Answer 8

whether a business offers goods and/or services that break the laws of the country.

Question 9

how can a business be classified in place?

Answer 9

place classifies the location of the business.

Question 10

describe a short term business.

Answer 10

when a business enters the market for a short period of time [6 months]

Question 11

describe an international market.

Answer 11

when a business has branches or outlets in other countries.

Question 12

what are the principles for perfect competition?

Answer 12

1) impact on competitions
2) homogenous
3) no price difference
4) significant barriers.

Question 13

what are three markets that have perfect competition?

Answer 13

• foreign exchange
• agriculture
• internet

Question 14

what are the imperfect competitions?

Answer 14

• monopoly
• oligopoly
• monopolistic

Question 15

define a monopoly.

Answer 15

when only one business produces or sells a particular project or renders a particular service and there are no substitutes for that product or service.

Question 16

define an oligopoly.

Answer 16

a market where there are a large number of competitors but the market is dominated by a few big businesses that are selling the same or very similar products or services.

Question 17

define monopolistic competition.

Answer 17

a system where there are a large number of sellers in the market, offering similar, but not identical goods and services.

Question 18

how can we prevent a monopoly from forming?

Answer 18

• economic sale
• a patent
• large sums of money
• government legislations

Question 19

what are the problems associated with a monopoly?

Answer 19

• the high price for goods
• the quality of the product
• lack of innovation
• forcing the suppliers to charge lower prices

Question 20

why are there many sellers in the monopolistic market?

Answer 20

there are no significant barriers to enter the market.

Question 21

what do businesses in a monopolistic market do to differentiate themselves and their products or services?

Answer 21

• the location of the business
• the branding
• the design, colour, shape, material used to manufacture the products
• the packaging
• the service levels from staff members
• the distribution levels
• the advertising and the marketing gimmicks

Question 22

how is a monopoly created?

Answer 22

• being first in the market
• if resources are scarce or difficult to imitate
• large capital outlay
• if a business has gained sufficient market shares
• horizontal integration
• vertical integration
• a legal monopoly

Question 23

why is advertising important in an oligopoly?

Answer 23

because there are few competitors, advertising becomes very important to try and “out-do” competitors. for this reason, “price wars” are often part of an oligopolistic market.

Question 24

why are businesses in an oligopoly interdependent?

Answer 24

businesses in an oligopoly market are interdependent, because any decisions taken by one of the businesses will have an immediate and direct impact on the other competitors.

Question 25

give an example of a business that decided to collude in a formal manner.

Answer 25

OPEC= Organization of the Petroleum Exporting Countries.