How businesses respond to their markets

Soyful Alam
Mind Map by Soyful Alam, updated more than 1 year ago
Soyful Alam
Created by Soyful Alam almost 5 years ago
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Topic 1 Unit 2b
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How businesses respond to their markets
1 Dynamic Nature Of Markets
1.1 A competitive market is one where there is intense rivalry between producers of a similar good or service
1.2 Competitivness can be measured in terms of the number of firms in the market - but also by their respective sizes
1.3 Consumers enjoy competitive markets because it results in greater choice, better service and cheaper prices
1.4 Markets are a dynamic because consumer taste and fashion change.
2 Changes in demand and supply have effects on the price of a product
2.1 Causes of a demand change
2.1.1 Consumer tastes & fashion
2.1.2 Substitute goods
2.1.3 Income
2.1.4 Seasonality
2.2 Causes of a change in supply
2.2.1 Weather
2.2.2 Income of customers
2.2.3 Cost of production
2.2.4 Technological advances
2.2.5 Government legislation
3 Profit Signalling Mechanisms
3.1 controls resource allocation in an economic structure
3.2 if people find that by making something they gain high profits, more and more people will start making that product,
3.3 more resources like time and money are allocated towards that product.
4 Price elasticity of demand
4.1 PED is a measure of the extent to which a change in price affects a change in demand
4.1.1 Determinants of PED
4.1.1.1 Degree of product differentiation
4.1.1.2 Availability of substitutes
4.1.1.3 Actual need for the product
4.1.1.4 Brand loyalty
4.2 demand is inealstic when the percentage change in demand is lower than the percentage change in price
4.2.1 PED 1-0
4.3 demand is elastic when percentage change in demand is greater than percentage change in price
4.3.1 PED = 1+
5 Changes in income
5.1 measures how a change in income affects demand for the firms producr - YED
5.2 Normal/Inferior/Luxory goods
5.2.1 demand shifts with peoples income
5.2.2 Demand for this increases strongly as income decreases
5.2.3 Demand for these increases strongly as income increases
5.3 disposable of income and necessity of product determine this
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