Exercises: How markets work and business opportunities

Explain what a market is and why it does not need to be a physical place. Name three different markets you use (a physical one, an online one, and one for 'things' that do not look like goods, such as private tutoring hours).

State the law of demand and the law of supply in your own words. Apply them to this case: at the school fair, the crêpe stall lowers its price from $\$60$ to $\$40$; what do you expect to happen to the quantity students want to buy and the quantity the stall would want to sell?

The diagram shows the market for bracelets at the school fair: the demand curve (D), the supply curve (S), and the point where they intersect (E).

1. a) Read the equilibrium price and quantity from the graph.
2. b) Explain what that point E means: what happens to the surplus bracelets or to the buyers left without a bracelet at that price?

In the juice market at the fair, the following data was recorded:

1. a) State the equilibrium price and justify your answer.
2. b) Explain what disequilibrium exists at $\$20$ and $\$60$, and how that pushes the price towards equilibrium.

Suddenly it becomes fashionable among nearby secondary schools to wear your cooperative's bracelets. Explain which curve shifts, in which direction, and what is to be expected of the new equilibrium price and quantity. What should the cooperative do if it wants to ride this wave?

A lemonade stand next to the sports center analyzes its environment. Classify each factor into microenvironment (near, directly affects the business) or macroenvironment (general, affects everyone): (a) another juice stand $50$ meters away; (b) the nationwide rise in the price of sugar; (c) the lemon supplier failing to deliver on Mondays; (d) teenagers becoming increasingly concerned about sugar; (e) a new law on allergens. Explain the difference in your own words.

On Sunday mornings, queues of $20$ minutes form at the only open bakery in the neighbourhood; the other two are closed. Nobody sells takeaway pastries in the nearby park, which is full of families.

1. a) Describe the imbalance between supply and demand there, using market terminology.
2. b) Propose a concrete business opportunity based on that imbalance and analyse two risks that could cause it to fail.

Two friends want to sell lemonade on Saturdays next to the sports center. Before taking the plunge, they analyze: who passes by, what else is sold nearby, where they will get the lemons, what the municipal regulations say about stalls, and what the weather is usually like in their town during those months.

1. a) Classify each analysis as microenvironment or macroenvironment and explain what decision they would make with each piece of information.
2. b) Write the sentence that summarizes their business opportunity: what they sell, to whom, and why there.

So that 'nobody goes without a snack', the school market organising team sets a maximum price ceiling of $\$20$ per portion when the equilibrium would be $\$50$. After half an hour, nothing is left and many students leave without a snack while others have bought three portions.

1. a) Explain using supply and demand why shortages occur.
2. b) Propose two solutions that maintain the community spirit without causing queues or reselling, and analyse their effects.