1.2 The Market

• Supply - The quantity of a good or service that producers are willing and able to offer at a given price

  Factors affect supply:

  • costs of production
  • indirect taxes
  • subsidies
  • new technology
  • weather conditions
  • external shocks
• Demand - The quantity of a good or service that consumers are willing and able to buy at a given price

  factors affecting demand:

  • income
  • substitute goods
  • complementary goods
  • changes in trends
  • advertising and promotion
• Income elasticity of demand - the responsiveness of demand to a change in income.
• Surplus - where there is excess supply.
• Shortage - where there is too much demand.
• Market equilibrium - the point at which the supply curve and the demand curve intersect and supply and demand are equal.
• Mass Market - intention that everyone should be the consumer of the product, the product is marketed to be sold to the largest possible audience

  • large numbers of consumers
  • very competitive
• Niche Market - A market segment that is smaller than the overall market and addresses a specialist need. E.g. Sensodyne for sensitive teeth.

  • can focus on the needs of the customer
  • fewer competitors
  • small target market
• market growth - increase in the size of the market for a product or service, usually due to an increase in demand.

  market growth = change in market size/original size x 100
• market share - the percentage of a market that a business controls, calculated by dividing its sales by the total sales in the market

  market share = sales of business/total market sales x 100
• Dynamic market - A market that is constantly changing and evolving.

  This can be via:

  • consumer preferences/trends
  • innovation
  • competitors
  • changes in legislation
• Online retailing - The selling of goods and services over the internet.

  • no rent means lower costs
  • may allow for lower prices meaning they are more competitive
  • customers able to compare prices and have more convenience
  • more competition
  • need to ensure customer details are protected from cyber criminals
  • some customers like to shop and see items in person