8. Market system

• Market consists of:

• Consumers - create a demand for a product

• Demand

• the amount consumers desire to purchase at various prices

• Not what they will buy, but what they would like to buy!

• Effective demand – must be willing AND able to pay

• Market demand – consists of the sum of all individual demand schedules in the market

Ось x Quantity Bought and Sold (000s)

Ось У Price

S- A shift in the demand curve to the left will reduce the demand to 300 from 500 at a price of £5. Suppliers do not have the information or time to adjust supply immediately and still offer 600 for sale at £5. This results in a market surplus (S > D)

D- In an attempt to get rid of surplus stock, producers will accept lower prices. Lower prices in turn attract some consumers to buy. The process continues until the surplus disappears and equilibrium is once again reached.

Квадрат-shortage Orange line- D

Ось x- Quantity Bought and Sold (000s)

Ось y – Price

9.Demand Curve

• Market demand – consists of the sum of all individual demand schedules in the market

• Represented by a demand curve

• At higher prices, consumers generally willing to purchase less than at lower prices

• Demand curve – negative slope, downward sloping from left to right

Ось x Quantity Demanded (000s)

Orange line The demand curve slopes downwards from left to right (a negative slope) indicating an inverse relationship between price and the quantity demanded. Quantity demanded will be higher at lower prices than at higher prices. As price falls, quantity demanded rises. As price rises, quantity demanded falls

The Demand Curve 2

• The level of demand – determines where on the graph it sits

• Low demand – nearer the origin

• High demand – further from the origin (assuming same scale)

• Dependent on a variety of factors

• Demand curve moves in response to changing factor

• The Demand Curve 3

• Factors influencing demand

D = f (P_n,P_n…P_n-1, Y, T, P, A, E)

Where:

• P_n = Price

• P_n…P_n-1 = Prices of other goods – substitutes and complements

• Y = Incomes – the level and distribution of income

• T = Tastes and fashions

• P = The level and structure of the population

• A = Advertising

• E = Expectations of consumers

The Demand Curve 4

Changes in any of the factors other than price causes the demand curve to shift either:

Left (Less demanded at each price) or

Right (More demanded at each price)

The Demand Curve 5

Ornage line- D1

D1Changes in any of the factors affecting demand other than price cause the entire demand curve to shift to the left (less demanded at each price) or to the right (more demanded at each price).

10.Customers Behaviour

Buyer behavior involves both simple and complex mental processes. Marketers cannot capture human nature in its entirety but we can learn a lot about customers through research, observation and thinking.

A customer's approach to purchasing a product or service is influenced by their situation - whether they have money and how important, frequent, risky or urgent the purchase is to them in their situation.

Many purchases are influenced by a whole host of emotional reasons like esteem and image.

Low Involvement Purchases'. In these situations, consumers can fall into a routine purchasing pattern which requires little thought and even less effort.

Whenever the need is stimulated - a particular brand is automatically purchased. This is called 'Routinised Response Behaviour.'

Alternatively, an expensive high risk infrequent purchase like your first computer will require a lot of detailed information and careful analysis before deciding which machine.

This is called 'High Involvement'.

Here the consumer goes through an extensive problem solving process - searching and collecting information, evaluating it and eventually deciding on a particular choice.

There is a third type of buying situation. This is where the customer has had some experience of buying a particular type of product or service before. There is less risk attached and less information is required. This is called 'Limited Problem Solving'.