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An understanding of the markets in which business operate is central to your appreciation of the business environment. You need to be able to identify the different types of market in which business operate:

• commodity
• consumer
• capital goods
• industrial
• end products
• services

You need to be able to identify, analyse and evaluate the range of factors that influence how markets operate. You also need to understand how businesses seek to shape and influence these markets.

The main factors show how:

• demand-side and supply-side factors for a product or service interact to generate price
• supply is affected by costs, technology, physical conditions, taxation and subsidies
• consumer demand is affected by income, age distribution, tastes, advertising, and other products
• the amount of competition in markets varies according to different factors, for example the number of buyers and sellers