OxNotes GCSE Revision
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Market prices depend on the levels of supply and demand. These supply and demand levels rise and fall according to a number of factors, and they can have a big impact on the success of a business.

A market is any place where buyers and sellers meet to trade products. The market price is the amount customers are charged for items and depends on demand and supply.

  • Demand - The amount of a product customers are prepared to buy.
  • Supply - The amount of a product businesses are willing, and able, to sell.


Prices change when supply and demand patterns change...
  • An increase in demand following a successful advertising campaign usually causes an increase in price.
  • An increase in supply when a new business opens usually causes a fall in price.

Price change affect a firm's costs. When the price of commodities such as oil and electricity increases, a business finds its own costs of production rise. Higher costs are either:
  • Passed on to the consumer in the form of higher prices.
  • Absorbed by the firm. This leaves prices unchanged but means lower profit margins for the company.
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