Markets and Market forces Markets Consumer goods and

Markets and Market forces

Markets • Consumer goods and services market – – Finished consumer goods and services Consumables/ Non-durables Consumer durables Intangibles • Capital goods market – Trade of capital goods – Used in the production of other goods, but not incorporated into them – Assists in the production of other goods

Markets • Niche market – Addresses a need for a product or service not being met by mainstream providers • Mass market – Products and services produced for mass consumption rather than targeting a specific type of customer • Labour market – Employers (buy labour) and employees (sell labour)

Demand • Demand depends on: – Price of Goods or services – Price of related products (Complements and Substitutes) – Income – Tastes and fashions – Advertising – Government policy – Population – Expected price changes

Supply • Supply depends on: – – – Price of goods and services Price of factors of production Productivity of factors of production Government policy (Indirect taxes and subsidies) Natural factors Advances in technology

Price determination • Determined by the interaction of demand for the good or service and the supply of the good or service • Demand supply interact to determine the equilibrium/ market clearing price • The equilibrium or market clearing price is that price where quantity demanded is equal to quantity.

Price Elasticity Used for Sales forecasting Pricing strategy

Price Elasticity = % change in quantity demanded % change in price >1 Price elastic product <1 Price inelastic product

Increasing Product Differentiation Reducing Pricing Elasticity Price Fixing Horizontal Integration