Introduction to Markets

1
Introduction to Markets

• 1st Economics Lesson!!

2
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.

3
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.

4
Economics Markets

• Your first set of theory to learn

5
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

6
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.

7
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

8
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

9
Introduction to Markets

• 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

• 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)

10
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)

11
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)

12
Is gold's the best bet?
13
FTSE 100 is this a good place to invest?
14
Stock Markets
15
Commodities US data
What would you invest in?
16
FT Commodities UK
17
Interpreting data Sterling V Dollar
How strong / weak is the to the ?
18
Cash Market - Gilts
19
Burgernomics! The Big Mac Index
20
FTSE 100 data 06/09/07
21
Your tasksYou will be given a market sheet to
interpretneed to think about

• What is being traded on the market you are
  looking at?
• Who do you think the buyers and the sellers would
  be?
• Why might they be buying and selling these items?
  
• Some of these markets are 'futures' markets -
  what do you think this means?
• What has happened to the price in the markets
  that you are looking at?
• Why do you think the price might have changed?

22
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?