2.5 competition Flashcards
what is price competition
firms lower their price to try and gain customers and market share
any firm that cannot compete will lose customers
what is non-price competition
offering a specialised product
convenience
quality of product
marketing
how does competition impact producers
forces improvement in efficiency including ways to reduce cost
increased innovation in all factor of production, a growth in economy and and increase in demand and supply.
greater profits for producers
how does competition affect price
because there is an increase in supply price will fall
has potential to drive cost up is marketing cost increase or innovation cost increase
why do producers compete
to enter a market
to survive in a market
to make profit
how does competition impact consumers
benefits - lower prices, higher quality
cons - producers may introduce harmful goods into production
what is a monopoly
one producer or seller dominated an industry
they exist because there are no barriers to entry
what is a duopoly
where 2 businesses dominate an industry
what is an oligopoly
a small number of firm dominate the market share
there will be barriers to entry but not significant enough to stop firms entering the market
how do oligopoly and monopoly differ from competitive markets
firms are usually much larger
if firms do grow in a competitive way they are moving towards an oligopoly
higher prices are often assumed as there is no need for a monopoly to be efficient
what is monopolistic competition
when firms offer competing products or services that are similar but not perfect substitutes
what is perfect competition
an imaginary market where all consumers have access to the same products and information
in a competitive market describe what happens to price
the price is set by the market forces of supply and demand
in theory the prices will be low and quantity greater
in an oligopolistic market describe what happens to price
can influence the price but is restrained by the reactions of rivals
both price and quantity will depend on how strong the competition is and the ability to collude (disrupt market equilibrium)
in a monopoly market describe what happens to price
is able to set the price but cannot control quantity
in theory can charger high price and produce smaller quantity
