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Introduction to Markets 1 st Economic’s Lesson!!
Introduction to Markets
1st Economic’s Lesson!!
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Is Economics a dry subject?
• The truth is that economics touches in some way upon just about everything important that happens in our world.
• For example, the level of interest rates has a major impact on everything from company profits to housing affordability - so it is worth an investor's while to have an understanding of what's going on at a wider level.
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A-Level Economics• What you'll find in our A-Level is "the
big picture" - lessons on interest rates, politics, global markets, employment statistics, environmental issues, standards and living and lots more.
• It is of course impossible to know the future - but you can at least get a better idea of which path the world is heading down.
Economics Markets
Your first set of theory to learn
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Introduction to Markets• Market – any place or
process that brings together buyers and sellers with a view to agreeing a price
• The basis of how an economy operates – through production and subsequent exchange
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TASK…• On whiteboards – write a list of 5
‘market’ places that you can think of.
• Now share your list with two other people.
• What ‘markets’ do you agree on?• What ‘markets’ are you unsure of?
• Be prepared to feedback ideas….
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Different types of markets
– Organised markets – commodities e.g. rubber, oil, sugar, wheat, gold, copper, etc.
– Financial markets – stocks, shares, currencies, financial instruments
– Goods markets – the supply and demand of goods and services in general, food, clothing, leisure, houses, cars, etc.
– Factor markets – the supply and demand of factors of production – land, labour and capital
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Introduction to Markets• A market does NOT have to be a physical
place – like a shop!
• The market place consists of all those who have items/services for sale and all those who are interested in buying those items/services
• Many businesses have global markets because of the developments in technology – see www.amazon.com or www.ebay.co.uk
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Introduction to Markets• Demand – the amount
consumers desire to purchase at various alternative prices
• Demand – reflects the degree of value consumers place on items – price and satisfaction gained from purchase (utility)
• Supply – the amount producers are willing to offer for sale at various prices
• Supply – reflects the cost of the resources used in production and the returns/profits required
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Factors affecting the efficiency of markets
– The amount of information about the markets held by consumers and producers
– The ease with which factors of production can put to alternative uses
– The extent to which price is an accurate signal of the true utility and true cost in determining the level of demand and supply (externalities)
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More factors affecting the efficiency of markets
– The degree to which firms hold monopoly power
– The degree to which property rights are clearly defined
– Whether the market can provide goods and services (public goods)
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Is gold's the best bet?
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FTSE 100 – is this a good place to invest?
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Stock Market
s
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Commodities – US dataWhat would you
invest in?
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Interpreting data – Sterling V Dollar
How strong / weak is the £ to
the $?
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Cash Market - Gilts
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Burgernomics! The Big Mac Index
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FTSE
100 data
06/09/07
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Your tasks…You will be given a ‘market sheet’ to interpret…need to think
about:1. What is being traded on the market you are looking at? 2. Who do you think the buyers and the sellers would be? 3. Why might they be buying and selling these items? 4. Some of these markets are 'futures' markets - what do you
think this means? 5. What has happened to the price in the markets that you
are looking at? 6. Why do you think the price might have changed?
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Homework• Think of more obvious markets that you are aware of -
shops, banks, leisure facilities, pubs, restaurants, night clubs and so on – SELECT ONE….
• Write an explanation of the market – • Who are the buyers and the sellers in these markets? • How does each group make decisions about
purchases?• What factors affect the efficiency of the market?• For example - if you go to a night club, what
determines which one you will go to? If you were the owner of a night club, what factors would you have to think about in offering your service and how would you go about attracting customers?
