Market Mechanism

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Market Mechanism

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Market Mechanism

  1. 1. The Market Mechanism BTEC Business
  2. 2. Demand and Supply <ul><li>How do we end up with a price for a good or service? </li></ul><ul><li>it is set by the level of demand and supply in the market </li></ul><ul><li>depends on how much of the product consumers want to and are able to buy </li></ul><ul><li>and how much firms are willing or able to sell </li></ul>
  3. 3. Factors Affecting Demand <ul><li>The price of the product: </li></ul><ul><li>usually, when a good’s price falls, more will be bought </li></ul><ul><li>Income: </li></ul><ul><li>consumers’ incomes influence their demand for goods and services </li></ul>
  4. 4. Factors Affecting Demand <ul><li>Price of other goods: </li></ul><ul><li>demand for one product can often depend on the price of another </li></ul><ul><li>Tastes and fashion: </li></ul><ul><li>people’s demands change over time as fashions change </li></ul>
  5. 5. Factors Affecting Demand <ul><li>Advertising: </li></ul><ul><li>consumers can be informed about new or improved products </li></ul><ul><li>persuasive messages can boost demand </li></ul>
  6. 6. Demand Changes With Price
  7. 7. Factors Affecting Supply <ul><li>The price of the product: </li></ul><ul><li>generally the higher the price that a firm can get for its products, the more it will offer for sale </li></ul><ul><li>Costs of production : </li></ul><ul><li>if a firm’s costs fall, it can supply more of its products </li></ul>
  8. 8. Factors Affecting Supply <ul><li>Prices of other goods: </li></ul><ul><li>the price of alternative products affects the quantity supplied of others </li></ul><ul><li>Technology: </li></ul><ul><li>advances in production techniques can fuel greater supply of some products </li></ul>
  9. 9. Supply Changes With Price
  10. 10. Putting Demand and Supply Together <ul><li>The market price can be seen at the point where the demand and supply lines cross: </li></ul>

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