Competitive markets

Question 1

What is a competitive market?

Answer 1

A market where there are many firms who try to gain more customers and profit than the others

Question 2

How do producers operate in a competitive market?

Answer 2

In order to be successful in a competitive market, firms must:
- Differentiate their products (USP)
- Create customer loyalty (perhaps through discounts or branding)
- Fully research the market in order to fill gaps and meet consumer needs
- Patent their products to prevent others copying them
-Anticipate and respond to changes in the market

Question 3

What is the impact of competition on producers?

Answer 3

Competition has a negative impact on producers as they have to maintain a competitive price and make sure customers are satisfied, which leads to lower revenue and increased costs, and therefore reduced profit

Question 4

What is the impact of competition on consumers?

Answer 4

Competition has a positive impact on consumers, as they will have a much larger choice of firms, which will push prices down