competition and competitive market processes Flashcards
what type of competition is a competitive market?
Competitive markets are those with an extremely high degree of competition
Competition is based upon the number of firms competing in a market
how does the degree of competition reduce in a competitive market?
the degree of competition reduces as the market structure moves towards being more of a monopoly
what are the benefits of competition ?
price reductions and improved quality as firms strive to gain market share
With more sellers in the industry, consumers enjoy a wider choice of goods and services
what are the benefits of short run ?
lower prices : competition causes firms to immediately lower prices for consumers in an attempt to gain market share
more choice : more sellers equals more choice for consumers
Customer satisfaction: firms compete using non-price competition strategies to gain consumers
what are the benefits of long run benefits?
sustained lower prices : only the most efficient firms will survive in the long term and will be more allocatively efficient
technology improvements: Long term competition increases the pace of innovation as firms aim to gain a competitive advantage
Eg. Renewable energy or pharmaceutical markets
long term quality :abnormal profits can be invested into R&D, to continuously innovate and improve the quality of goods/services in order to become recognised in a crowded market
what are non price competition strategies ?
after sale service - Firms offer ongoing support and assistance post-purchase to differentiate from competitors
This improves consumer satisfaction and leads to repeat purchases
packaging
delivery policies - Firms are increasingly offering improved delivery and return policies to attract consumers
improved quality - Constant innovation and upgraded features increase sales and maintain competitiveness.
E.g Apple’s regular release of upgraded iPhones
