2.1.4 digital economy + markets and firms

Question 1

What have price comparison sites helped to reduce?

Answer 1

Asymmetry of information between consumers and suppliers as they increase access to knowledge.

Question 2

What is micromarketing?

Answer 2

Where advertising is focused on a small group of consumers, and can be associated with e-commerce.

Question 3

How can micromarketing be used in e-commerce

Answer 3

Special offers and voucher codes which are aimed towards individuals.

Question 4

What does the long tail theory suggest?

Answer 4

That consumers get a wider choice with online retailing.

Question 5

What does the long tail theory describe?

Answer 5

How firms sell a large number of nice products, which satisfy individual consumers’ needs, but only a small quantity of each product.

Question 6

Why can online retailers stock a wider range of products?

Answer 6

As the costs of storing and distributing the product is high, but online retailers would not have as high costs due to lack of physical store space.

Question 7

How do small firms survive in competitive markets? [5]

Answer 7

• Product differentiation + USPs
• Achieving competitive advantage through relationships with stakeholders
• Economies of scale relative to market size
• Advantage of other firms facing diseconomies of scale
• Small firms as monopolists