markets

Question 1

explain what is meant by a market.

Answer 1

a market is a place where buyers and sellers meet, for the exchange of goods and services in exchange for money.

Question 2

explain what is meant by competition.

Answer 2

competition is the rivalry between companies selling similar products and services with the goal of achieving revenue, profit, and market share growth.

Question 3

list the types of markets.

Answer 3

• local
• global
• online
• mass market
• niche market
• trade markets
• product v service
• seasonal market

Question 4

what is a seasonal market?

Answer 4

Seasonal markets have a certain level of demand i.e. sales of Christmas Trees and mince pies would be much higher in December compared to in the Summer.

Question 5

what is a local market?

Answer 5

includes businesses such as a hairdresser, that work with a small-scale customer base and few competitors.

Question 6

what is a global market?

Answer 6

large markets with a large customer base, that operate on a very large scale.

Question 7

what is an online market?

Answer 7

a market that is operated online, allowing for easier access and lower set up costs.

Question 8

what is a mass market?

Answer 8

goods that are targeted at everyone within the population, allowing them to benefit from economies of scale due to the large volume of good being ordered.

Question 9

what is a niche market?

Answer 9

a niche market sells specialised goods and services, therefore sold in smaller quantities at a higher price. usually have low levels of competition, but this can vary if a business expands and grows

Question 10

what is a trade market?

Answer 10

sale of products to other businesses e.g. retailers, if effective, sales to final consumer rises.

Question 11

what is a product v service market?

Answer 11

Products are a tangible good, whereas services are intangible and more difficult to value. A product has a useful life, longer than a service which is immediately consumed.

Question 12

what is market share?

Answer 12

the percentage share that an individual business holds over the overall market that they operate in. higher share means greater influence.

Question 13

what is market size?

Answer 13

the amount of total sales in a market measured in terms of value or volume.

Question 14

what are market trends?

Answer 14

what is popular in the market at the time, taking into consideration the product life cycle.

Question 15

what is market segmentation?

Answer 15

the process of splitting up the market into different subgroups: demographic, psychographic and geographic.

Question 16

explain the three market segments.

Answer 16

• demographic = based on factors such as age or gender
• psychographic = based on factors such as personal tastes, income, lifestyles, opinions etc
• geographic = based on the area in which you are based e.g. rural, urban.

Question 17

what is the impact of market segmentation on businesses and customers?

Answer 17

it allows a business to discover who their target market is, allowing them to gain loyal customers and generate more profit.

Question 18

what are the four types of competition?

Answer 18

• monopoly
• monopolistic
• oligopoly
• perfect

Question 19

explain a monopoly competition.

Answer 19

A monopoly is a business that has over 25% dominance over the market. This type of competition is illegal in the UK, and there are laws in place to stop it from happening. A monopoly is able to mass produce products, at a cheap price, for maximised profit, especially because they will have a large customer base.

Question 20

explain an oligopoly competition.

Answer 20

An oligopoly is when there are a few business firms with dominance in the market. For example, in the UK, supermarkets such as Tesco, Sainsbury’s and Asda would form an oligopoly market. However, price fixing, and cartels are illegal in the UK, so the businesses could not form to create a cartel and fix the prices.

Question 21

explain a monopolistic competition.

Answer 21

A monopolistic competition is when there is lots of competition, however, products are slightly differentiated, which allows a customer to differentiate between them i.e. Pizza Hut and Nando’s. There are very few barriers to entry, however limited price setting powers.

Question 22

explain perfect competition.

Answer 22

A perfect competition is when the products sold have no differentiation, and there a lot of buyers and sellers. The businesses in perfect competition settle for the set prices, and there are no barriers to exit and entry.

Question 23

why do consumers need protection from exploitation?

Answer 23

protection enables them to purchase a product they desire with no hassle, and also helps maintain a business’ reputation.

Question 24

what is demand?

Answer 24

the amount of a good or service a customer is both willing and able to purchase.

Question 25

what is supply?

Answer 25

the amount of a good or service a producer is willing and able to put out on the market.

Question 26

what is equilibrium?

Answer 26

the point at which demand and supply are equal.

Question 27

what is the importance of demand and supply in a market?

Answer 27

demand influence the supply of a product, regarding the maximum price a good can be sold at, and how much of it is being requested.

Question 28

state factors leading to a change in supply and demand.

Answer 28

• seasons
• trends
• income
• need and/or want
• government action
• competition

Question 29

how can a change in supply and demand impact price and quantity?

Answer 29

higher demand calls for higher quality, leading for a chance to ride the purchase price, and vice versa.

Question 30

Understand the factors that cause the demand and supply curves to shift and the effect this has on equilibrium price and quantity.

Answer 30

Demand curve to the right = higher equilibrium point. Demand curve to the left = lower equilibrium point Supply curve to the right = lower equilibrium point Supply curve to the left = higher equilibrium point