Bpp learning Media is an acca approved Content Provider

demand
and 
supply 
(
Sections 4 to 8
).
BPP Tutor Toolkit Copy

---

PART A: THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT 
 
86
 
Study Guide 
Intellectual level
 A5 
Microeconomic 
factors 
(a) Define the concept of demand and supply for goods and 
services. 
K 
(b) Explain elasticity of demand and the impact of substitute and 
complementary goods. 
K 
(c) Explain the economic behaviour of costs in the short and long 
term. 
K 
(d) Define perfect competition, oligopoly, monopolistic competition 
and monopoly. 
K 
 
1
The micro environment 
The 
micro environment 
refers to the immediate operational environment, including suppliers, 
competitors, customers, stakeholders and intermediaries.
The micro environment includes all factors which impact directly on a firm and its activities in relation to 
a particular market in which it operates, and also any internal aspects of the organisation which 
influence the development of a marketing strategy. 
The 
micro environment
includes the groups and organisations that have a two-way operation 
relationship with the business, and which the business can 
control
and 
influence
to some degree.
1.1 Supply and demand 
An organisation's micro environment consists of itself and its current and potential 
customers, suppliers
and 
intermediaries
. The competition also has a key influence on the micro environment. 
The organisation is an open system, with boundaries to its immediate environment. The organisation 
must establish relationships across these boundaries to obtain supplies and credit. It also must have 
linkages to the marketplace, either directly to end customers or indirectly through intermediaries.
Competitors also form part of the micro environment and senior management must understand the 
relationships that exist between competitors in the micro environment of the organisation. This was 
covered in more detail in Chapter 1 where we took a closer look at the 
stakeholders
of an organisation.
We might need to remind ourselves of some of the underlying relationships between an organisation and 
the other organisations in its environment.
The