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Industrial Structure

5 important questions on Industrial Structure

• Elastic demand (pizza, coke)

Sensitive to price changes
Large change in quantity demanded

Inelastic demand (medicine, car fuel)

• Insensitive to price changes
• Small change in quantity demanded

Cross-price elasticity of demand

Is a measure of how the demand for one good is affected by changes in the prices of other goods. It is calculated with the formula

The determinants of elasticity of supply

· The nature of the production process and time-scale in question.

· Easier to increase the supply of manufactured goods than agricultural goods, given the nature of the production processes involved.

· Agricultural goods can be increased in supply, given time to replant stock, so supply is more responsive to price changes in the longer time period

Importance of market to business

· It is important for firms to understand the following market conditions:

· They need a knowledge of the shape and position of the demand curve they face, including the following aspects.

· The nature of the good they produce.

· The way in which it is viewed by consumers.

· The factors that affect the demand for their good.

· Any changes likely in the future which will affect the market.

· Any likely government intervention in the market.