Competitive & Non-Competitive Markets Flashcards
Supply and demand in competitive markets?
As a new firm enters the market:
Supply shifts right: lower prices, lower cost of production more competitive
Demand shifts left: more substitutes
What is a competitive market?
A market that has many buyers and sellers. In order to work efficiently producers must face no barriers to entry and consumers have perfect information.
How does competition impact consumers?
Benefit from lower prices and more choice and improved quality products
How does competition impact producers?
Have to become more efficient to survive. Lower prices and spend profits more carefully
How does competition impact the government?
Mostly encouraged by government as it leads to increased consumer wellbeing (lower prices and more choice). However, less profits means less tax (money for govt.)
What is a Non-competitive market?
A market with 1 or a few firms (monopoly/oligopoly).
Characteristics of a Non-competitive market?
High barriers to entry
Differentiated products
More control over prices
Aim to profit maximise
How does Non-competition impact consumers?
Higher prices
Lower quality products
Little choice
How does Non-competition impact producers?
Producers make large profits
Less motivation to produce efficiently/produce quality products
How does Non-competition impact the government?
Government intervention in case a consumer loses out
Large profits made by these firms lead to more tax
