Flashcards in markets and customers Deck (27):
what will the degree of confidence depend upon?
how the sample was chosen and the size of the sample
define the confidence interval
there will always be a margin of error, the wider the margin of error (confident interval) the higher your confident level will be
what is market mapping?
market mapping helps firms to understand how customers perceive their firm or product by looking at different features that distinguish different products or firms. they position the product so that it meets the needs of the target customers
what are the methods of analysing trends? describe what they are
correlation- identify relationships between variables and strengths of them
extrapolation- look at previous trends to predict and estimate the future sales
forecasting- different methods used depending on the nature of product and market situation
what are the uses of correlation?
identify relationships between variables, so firms can use the information for decision making
what are limitations of correlation?
correlation only shows the link between two variables, and does not show a cause and effect relationship between the variables
what is a sales forecast?
a month by month forecast of the level of sales you expect to achieve, which are usually drawn up annually
explain why it is risky to assume cause and effect when looking at factors that are correlated
factors change in market conditions (extrapolation) so correlated factors may not always be accurate
explain why bungee jumping us a good example of an elastic response to a change in variable
stretch is great compared to action. one small change in prices makes a big difference to sales
in terms of price elasticity, what happens to revenue if prices are elastic
increase price, revenue falls or decrease price, revenue increases
what happens to revenue when prices are inelastic?
increase price, increase revenue or decrease price, decrease revenue
what are price elastic products?
a change in the price of a price elastic product will result in a proportionally larger change in demand. a small change in price will lead to a large change in demand
what are price inelastic products?
a change in price of a price inelastic product will result in a smaller change in demand. a large change in price will lead to a small change in demand
a price cutting strategy will increase revenue for an ______ product
a price increasing strategy will increase revenue for an ________ product
price elastic products have an elasticity of _____ than 1
price inelastic products have an elasticity of ____ than 1
what is it called when elasticity is at 1?
what is the formula for change in demand?
change in price X price elasticity
calculate the change in demand when a business puts up its prices by 10% when the price elasticity of demand for its product is -2.0
10% X -2.0 = 20%
what factors can affect the price elasticity of a product?
the degree of product differentiation
proportion of their income
availability of substitutes
what are the types of income elasticity?
explain what will happen to the correlation between consumers income and the demand of a product
normal goods- a fall in income will lead to a fall in demand and an increase in income will lead to a rise in demand
inferior goods- a fall in income will lead to a rise in demand and an increase in income will lead to a fall in demand
how much does demand change in relation to change in income for income elastic goods?
the percentage change in demand is more than the percentage change in income so it is greater than 1
how much does demand change in relation to a change in income for income inelastic goods?
the percentage change in demand is less than the percentage change in income so it's less than 1
define price elasticity of demand
the responsiveness of demand to a change in price i.e. does demand change by a large or small amount when there is a change in income
what is income elasticity of demand?
the responsiveness of demand to a change in income i.e. does demand change by a large or small amount when there is a change in income