MODULE 7

• Market


  Group of customers for specific products or services that are essentially the same
• Market


  organized exchange of goods, services, or resources between buyers and sellers within specific geographic area and during a given period of time
• Buyer


  gives up money and gets a good
• Seller


  gives up a good and gets money
• Industry


  group of firms producing products and services that are essentially the same
• Industry


  One or more business firms that produce similar products
• 
  

  Change in Quantity Demanded

  
• 
  

  Change in Demand

  
• Change in Quantity Demanded


  Movement along a demand curve
• Change in Quantity Demanded


  when QD changes due to a price change
• Change in Demand


  When QD changes due to non-price factors
• Change in Quantity Demanded

  QD changes in a direction opposite to that of price
• Change in Demand


  Demand Curve Shifts leftward or rightward
• Uncontrollable Factor


  something that affects demand that a company cannot control
• Uncontrollable Factor


  Includes price of substitute and complementary products owned by other companies
• Controllable Factor


  something that affects demand that a company can control
• Controllable Factor


  Includes prices of substitute or complementary products also owned by the company
• Uncontrollable Factors

  • Income
  • Interest Rates
  • Weather
• Controllable Factors

  • Price
  • Distribution Speed
  • Product Quality
• Change in Quantity Supplied

  
• Change in Supply

  
• Change in Quantity Supplied


  Movement along the supply curve
• Change in Quantity Supplied


  When QS changes due to price change
• Change in Quantity Supplied


  When QS changes in the same direction as the price
• Change in Supply


  Shift of the supply curve
• Change in Supply


  QS changes due to non-price factors
• Change in Supply


  Supply curve shifts leftward or rightward
• Market Equilibrium


  The price at which quantity supplied equals quantity demanded
• Industry Analysis

  Understanding the forces at work in the overall industry is an important component of effective strategic planning. 
• If price is above the equilibrium price

  Then, there are too many sellers, forcing price down
• If price is below the equilibrium price


  There are less sellers, forcing price to increase
• Price


  Primary way that market participants communicate with one another
• High Prices


  Consumers - consume less

  Suppliers - supply more
• Low Prices

  Consumers -consume more

  Suppliers - supply less
• Equilibrium Price


  No pressure for the price to change because the number of sellers = number of buyers
• Equilibrium price 


  No pressure for the price to change because quantity demanded = quantity supplied
• Market


  Has a product, geographic, and time dimension
• Define the market before using supply-demand analysis
• In a competitive equilibrium

  There are no unconsummated wealth-creating transactions
• Supply and Demand Curves


  can be used to describe changes that occur at the industry level