Unit 1 AoS 2 - decision making in markets

Unit 1 AoS 2 - decision making in markets summary notes Key knowledge • the assumptions of a perfectly competitive market system • the law of demand and the demand curve • the effect on demand and the position of the demand curve by non-price factors, including changes in disposable income, the prices of substitutes and complements, tastes and preferences, interest rates, population and demographics, and consumer confidence • the distinction between a movement along the demand curve and a shift of the demand curve • the law of supply and the supply curve • the effect on supply and the position of the supply curve by non-price factors, including changes in the costs of production, technology, productivity, and climatic conditions and other disruptions • the distinction between a movement along the supply curve and a shift of the supply curve • the effects of changes in demand and supply on equilibrium prices and quantities • the role of the market mechanism and relative prices in the allocation of resources in a market-based economy • the degree of market power in different markets, such as perfect competition, monopolistic competition, oligopoly and monopoly, and the effect on prices, resource allocation and living standards • the strategies businesses may use to increase profit, including price discrimination, multiple branding or anti-competitive behaviour as outlined in the Competition and Consumer Act 2010 • one contemporary example of a market, including the degree of competition in that market