2.5.3 The competitive environment

Question 1

What is competition?

Answer 1

2 or more businesses targeting the same customers

Question 2

What are 4 negatives of competition?

Answer 2

• If price main focus, sacrifice quality
• Some businesses will fail
• Businesses grow - chance to consume smaller businesses
• All businesses competing for profit can reduce profit levels for individuals

Question 3

What are 2 positives of competition?

Answer 3

• Lower prices for consumers
• Encourages innovation

Question 4

How does the size of a market effect competition?

Answer 4

Large markets bring more competition