1.2.4 competition Flashcards
1
Q
Competition
A
Rivalry that exists between firms when trying to sell goods/services into a particular market
2
Q
Advantages of competition to consumers
A
- Lower prices
- More choices
- Better quality goods/services
3
Q
Disadvantages of competition to consumers
A
- Market uncertainty
- Lack of innovation
4
Q
Advantages of competition to the economy
A
- Efficient allocation of resources
- More innovation
- New technologies
- Higher standards of living
5
Q
Disadvantages of competition to the economy
A
- Wasted resources
6
Q
Advantages of small firms
A
- Personal service to customers
- More flexibility (adapt to change quickly)
- Niche markets (a subset of a larger market with individual needs/preferences)
- Community support
- Better communication (less employees)
- Innovation and quick reactions to market demands
7
Q
Disadvantages of small firms
A
- Lack of access to financial resources
- Lack of finance
- Lack of qualified/experienced staff (cannot afford specialists)
- Low recognition (small promotional budget)
- Higher average costs (output is limited)
- Vulnerability (have to compete with larger firms)
8
Q
Why firms stay small
A
- Size of market
- Nature of market
- Lack of finance (growth requires investments)
- Aims of the entrepreneur (may not want to grow business)
- Diseconomies of scale (growth can result in DOS)
9
Q
Advantages of large firms
A
- Economies of scale (lower average costs)
- Market domination (reputation)
- Large scale contracts
10
Q
Disadvantages of large firms
A
- Bad coordination and control (too many employees)
- Too bureaucratic (too many resources used in administration)
- Poor motivation (workers feel insignificant)
11
Q
Factors that affect the growth of firms
A
- Government regulation
- Access to finance
- Economies of scale
- Desire to spread risk
- Desire to take over competitors
