Chapter 2: Market analysis

• What is market analysis?

  A detailed assessment of your business's target market and the competitive landscape within a specific industry
• What is quantitative data?

  Information as numerical value that can be collected through research and use to make decision
• What is qualitative data?

  Non-numerical values that describes qualities, patterns and characteristics usually in the form of descriptive words.
• What is elasticity of demand?

  Responsiveness of quantity demanded to a change in price.
• PED formula

  % change in quantity demanded / % change in price
• % change formula

  (difference of new and old / old ) x 100
• What an elastic product?

  Product with many substitutes and are in a very competitive market. (E.g luxury goods, expensive goods, chocolate, cereal, bread). It also means that they are sensitive to a change of price
• What's an inelastic product?

  A product with a demand that does not change significantly when its price changes. It occurs when the level of competition are low and there are few substitutes. (E.g necessities, addictive goods).
• Factors that affects PED

  • Number of close substitutes
  • Cost of switching between goods
  • Peak and off-peak demand
  • Breadth of definition of a good or service
  • Method of payment
  • Proportion of income allocated to spending on the good
• What is income elasticity of demand?

  Income elasticity of demand measures the responsiveness of the quantity demanded of a good or service to a change in income.
• YED Formula

  % change in quantity demand / % change in income
• Coefficients of PED

  • If =0: demand is perfectly price inelastic
  • If < 1 : demand is price inelastic
  • If >1 : demand is price elastic
  • If = infinity: demand is perfectly price elastic
• Coefficients of YED


  • If >1: elastic (Luxury goods).
  • If 0-1: inelastic (Normal good)
  • If <0: Negative (Inferior goods)
• What is a normal good?

  A normal good is a type of good for which demand increases as income increases (E.g clothes, food, entertainment)
• What is a luxury good?

  Non-necessity goods, but which give you pleasure or make your life more comfortable (E.g holiday, new phone, etc)
• What is an inferior good?

  A good for which demand decreases as income increases. (E.g frozen vegetables)
• what is peak demand?


  A time at which a product was at its maximum demand and had its most ever sales
• What is off-peak demand?

  The practice of charging lower prices for goods or services during times of low demand.