Competition

Question 1

what is competition?

Answer 1

organisation selling products that are substitute goods, target at same group of consumers

Question 2

what does competition does to :
DEMAND AND COSTS

Answer 2

-reduces demand and increase costs.

• when a competitor enters the market or launches a new product, the demand for the rival product is likely to decrease as people will buy competitors product.
• the rival is likely to increase its marketing costs and spend more on improving and diversifying products in response to the competition. they also may cut its cost to keep the price of product lower than competitive to increase demand.

Question 3

what is 3 types of competition?

Answer 3

1. perfect competition = is where all firms compete on equal basis.
   - products are identical and charge similar prices
   - business need to keep their cost low so prices are low otherwise demand is taken by competitors
   however also need to keep high quality of products to keep a good level of demand.
2. oligopoly = a small number of large firms dominate the market and charge similar prices. for business to get ahead they need to focus on marketing and brand image to increase in demand so marketing costs will be high.
3. a monopoly = is where on business has complete control over the market. there is no competition. a business with monopoly can increase its price without much concern of demand decreasing and able to keep marketing costs low.