1) What influences supply & demand in a market?
There are many factors that can affect supply and demand. Price affects the quantity supplied while non price determinants affect supply and demand as a whole. These non price determinants include but are not limited to, price of complimentary and substitute goods, market size, expectations, income, taste or preference, weather, technology, the cost of production… etc.
2) How can economic sectors relate to each other?
The 4 economic sectors, primary, secondary, tertiary and quaternary are all interdependent as they rely upon each other to function. Many times, the sectors must work together to produce a single product. Each sector has their own unique role that are essential to the success of a product. Without the primary sector, the secondary sector would never get the raw materials needed for manufacturing a good. Likewise without the secondary sector, the tertiary sector wouldn’t be able to sell anything. For example if the primary sector mines some gold, industries in the secondary sector will buy it to manufacture a good. For it to be sold to the final consumer, the secondary sector is reliant on the stores in the tertiary sector. The sector that is the least reliant upon the others is the quaternary sector. Normally quaternary sector provide a service that is knowledge based. So although it does affect the the other sectors, it is not reliant upon them to function.
3) What path do raw materials take to consumers?
The process that every product goes through can vary greatly. For example, let’s look at the Nike running shoe. This product is one that goes through many of the economic sectors. The raw materials such as rubber, fabric and leather that are used in the shoe are gathered from primary industries. The materials are then given to factories in the secondary industry to actually manufacture and assemble the shoe. Finally, the shoes are shipped and sold in stores, which would be part of the tertiary industry. The market research consultants who work for Nike could be considered as the quaternary industry. In this example, the product went through every economic sector. Although this is one of the more standard processes, other products may not follow the same path. An example of a this would be firewood. The wood is first chopped down in what is the primary sector. After this it differs from the Nike shoes as it requires no manufacturing. So, this product skips the secondary industry entirely and can be immediately sent to stores (tertiary sector) to be sold to the public. As seen in these examples, the process that a product takes from raw material to consumer can be very different as different products have their own methods of production.
4) How is equilibrium reached in a market?
Equilibrium is reached in a market when supply and demand are equal. It is caused by the pressure put forth by market forces. For example, if price decreases, it can be expected that demand will increase. At the previous point of equilibrium a shortage is created. Market forces then put upward pressure on price and with every increase in price, quantity demanded decreases and quantity supplied increases. In addition, the shortage decreases until it reaches a higher equilibrium price and quantity than before. The opposite happens if prices are above equilibrium. Quantity demand would be decreased and a surplus would be created. Market forces would then put downwards pressure on price so that with every decrease in price, quantity demanded increases and quantity supplied decreases. The surplus would then slowly diminish until equilibrium is reached.
5) To what extent do companies compete indirectly with each other?
I think that business within the same industry can be considered to be indirect competitors, as long as the business fulfil a similar want/need. Even if the product being sold by these companies may differ, if they essential fulfil the same purpose, they are competition. Let’s take McDonalds and a local noodle restaurant for example. Although the types of food they sell are entirely different, and one is significantly larger as a brand, they both fulfil the need for food. It is for this reason that although they might not be direct competitors, they are definitely indirect competitors.