Markets andconsumers

Markets = where buyers and sellers agree to buy or sell at a price that makes the transaction worthwhile
Exchange = selling produce for money
Specialisation = creating products we can make and sell most efficiently
Competition = businesses strive against each other to attract more customers by keeping prices down and making the product more appealing. More sellers = more competition = lower prices
Costs = payments to get product into market
1. wages
2. premises
3. input costs
  1. raw materials
  2. components
  3. inputs from wholesalers
  4. business rates
  5. interest
  6. energy rates
Sales revenue = price x quantity sold
Profit = Revenue - Cost
Investment = spending now to generate future income
1. capital equipment such as machinery, computers, veichles, research, development, training
Scarcity = when people want to buy more of a product than there is being produced
Incentives = rewards to induce certain behaviour e.g. profit
Supply = quantity of a product produced
1. Factors that affect supply
  1. Cost of production
  2. New tech
    1. Cost falls, price falls, supply rises
  3. government policies e.g. VAT
  4. Good prices
Demand = quantity of product/service customers want to buy
1. Factors that affect demand
  1. Fall in prices
  2. incomes
  3. substitutes
    1. products which replace each other
      1. Price of one product rises, demand for it's substitute rises
  4. Complements
    1. products that go well together
      1. price of one product rises, demand for complement will fall
  5. Tastes + fashions
    1. affected by advertising
  6. population
    1. if growing, demand rises
Inferior goods = those that people buy more of when their incomes fall
Normal goods = those that are not inferior
Cost of production = payments needed to create a products + make it available in the market
1. wages, premises, capital equipment, inputs etc
Process innovation = developing completely new products
1. uses new tech to produce at a lower cost
Technological change = uses new scientific knowledge + improved engineering techniques to create new products
Market orientation = business focus of customer needs
Product orientation = focus on product, price + promo
Demand curve = relationship between price + quantity that customers want to buy
Supply curve = relationship between price + quantity that producers want to sell
Equilibrium price = price both buyers and sellers are satisfied with
market clearing price = current selling price

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