competition and eos

Question 1

What are the positive effects of competition to producers?

Answer 1

1. It improves productivity.
2. They become more efficient as they cut costs to maintain profit.
3. They become more innovative to keep supplying consumers with new products.

Question 2

What are the negative costs of competition to producers?

Answer 2

1. They may have to replace workers with machinery, which costs money.
2. Workers are consumers and the more people with less income, less demand.
3. If they cant compete well they may lose market share and go bankrupt.
4. With falling prices, there is less revenue.
5. More workers are needed to make innovative products.

Question 3

what are the positive effects of competition on consumers?

Answer 3

1. Lower prices mean consumers can buy more, increasing SoL.
2. Innovation means that consumers have more choice.
3. Increase in consumer sovereignty.
4. Better quality produces increase SoL.

Question 4

What are the negative effects of competition on consumers?

Answer 4

1. Quality may fall as producers cut costs by using cheaper materials.
2. Consumers may buy products they may not need due to marketing - may lead to deprivation of resources.
3. Innovation may lead to the use of harmful chemicals.