Market Economy Terms 2.02 Examine purchasing decisions and various products with respect to value, service, maintenance and price.

Market Economy Basic economic decisions are based on the actions of buyers and sellers in the market.

Price The amount of money given or asked for, when goods or services are bought or sold.

Market or Marketplace Any place where individuals buy and sell goods and services.

Demand The amount of goods or services consumers are willing and able to buy.

Law of Demand Consumers will buy less of an item at a higher price than at a lower price.

Supply Amount of goods or services that producers will provide.

Law of Supply The higher the price more producers will supply it and the lower the price fewer producers will supply it.

Surplus An over supply of a product. Producers are producing more of a product than consumers will buy.

Shortage An under supply of a product. Consumers are demanding more of a product than producers are producing.

Equilibrium Price The price at which the amount supplied and the amount demanded come together.

Nondiscretionary Income Income used to purchase items to meet basic needs

Discretionary Income Income that is left over after a consumer’s basic needs have been met

Types of Products  Convenience Goods  Shopping Goods  Specialty Goods

Convenience Goods  Goods consumers buy regularly without spending much effort.  Usually inexpensive Examples: milk and bread

Shopping Goods  Goods consumers buy after spending time looking around and comparing products.  Usually more expensive than convenience goods Examples: vehicles and designer clothing

Specialty Goods  Goods that consumers select by brand or company which require a special sales effort.  Usually expensive Examples: digital cameras, stereo equipment, and perfume

Types of Merchandisers  Department Stores  Mass Merchandisers  Off-Price and Outlet Stores  Limited Line Retailers  Superstores/Hyperstores

Department Stores  Stores have different departments selling a variety of products – men’s, women’s, children’s clothing, home furnishings, jewelry, and services  Goods are moderately priced, salespeople are in each dept., special services are available (gift wrapping, delivery), elaborate merchandise displays and may even have a salon Ex: Macy’s, Nordstrom’s, Saks Fifth Avenue

Mass Merchandisers  Sells a variety of items at reasonable or low prices; often are nationwide stores; practical displays and not always very organized; some service is available Examples: Target, Sears, Wal Mart

Off-Price Stores  Off-price stores usually buy from producers with surpluses; therefore, carry many manufacturers’ brands or manufacturer’s overruns  Prices are discounted at 20-70% off; merchandise can be slightly imperfect or discontinued; limited service is available Example: TJ Maxx

Outlet Stores  Outlet stores are operated by the manufacturer and carry only that manufacturer’s brand or an affiliated manufacturer Examples: Easy Spirit, Carter’s, Peaches and Cream, Corning

Limited Line Retailers  Sell only one kind of merchandise – clothing stores, athletic goods stores, home appliance stores, hardware stores; services vary, selling methods and prices vary Examples: Limited, GAP, Foot Locker, Best Buy

Superstores/Hyperstores  Superstores: Extremely large (30,000 sq feet), similar to supermarkets, but also sell mass merchandise items like clothing, garden products, and books; no customer services  Hyperstores: Larger than Superstores (200,000 sq feet) Examples: Kroger, Harris Teeter, Lowes Food Store, Food Lion