Chapter 3 - External Influences

Question 1

What is a market?

Answer 1

Any situation where buyers and sellers are in contact in order to establish a price

Question 2

What is a competitive market?

Answer 2

A competitive market is a market structure in which there are a large number of firms producing a similar who are competing to meet the needs of consumers.

• they have little if any power in the market
• they have to accept the price in the market
• competition in this market is therefore mainly on the basis of price

Question 3

What is a monopoly?

Answer 3

A market controlled by a single business is known as a monopoly and the firm is known as a monopolist

• they can control the market because it is the only supplier of the product
• it can charge whatever price it wants
• it can adopt a take it or leave it approach to customers

Question 4

What is monopolistic competition?

Answer 4

This market is similar to a competitive market but unlike a competitive market, in monopolistic competition there is usually a lot of non-price competition; product are branded then prompted by the business

Question 5

What is an Oligopoly?

Answer 5

An oligopoly exists where a market is dominated by a few large firms

Question 6

What is barriers to entry and barriers to exit?

Answer 6

Barriers to entry - the factors that could prevent a business from entering and competing in the market
Barriers to exit - the factors that could prevent a business from leaving the market

Question 7

What is organic growth?

Answer 7

Organic growth is achieved by increasing the firms sales. This comes from selling more to existing customers. It will help lead market dominance

Question 8

Mergers and takeover

Answer 8

A merger is where two companies come together to form a new and larger business
A takeover is acquiring control of another company

Question 9

If a single business becomes dominant within the market in the U.K. Who are they investigated by?

Answer 9

CMA - competition and market authority

They investigate whether there is an anti competitive agreement going on if there is the business can be fined up to 10 per cent of their global turnover, customers and competitors can sue them,

Question 10

What is demand and supply

Answer 10

Demand - the quantity that people in a particular market can and will purchase at each price