4.1.5.8 - The Dynamics of Competition and Competitive Market Processes Flashcards
Traditionally, how have economists thought of competition?
Price competition, leading to consumers benefitting from lower prices and more choice.
Why does the economy benefit from competition?
It weeds out high-cost and inefficient firms.
How do firms compete in imperfectly competitive real-world markets?
Not only on the basis of price, but also on the basis that firms will strive to improve products, reduce costs, and improve the quality of the service provided.
How else can firms compete (outside of price) in imperfectly competitive markets?
Marketing, Branding, Packaging, Fashion, etc.
Why do firms employ non-price competition?
To make themselves more dynamically efficient.
What is creative destruction?
New technologies completely changing markets.
Who benefits from price competition?
Both consumers and firms benefit from price competition.
Who benefits from non-price competition?
Firms. Particularly those that are dominant to increase their market power.
