Economics topic 7 Competition Flashcards
What do firms in competitive markets compete for?
Price
Product
Promotion
Placement
Why do firms in competitive markets try to make their prices as low as possible?
Businesses in competitive markets will look to sell their products at a price lower than their competitors in order to attract customers to their product
Why do firms in competitive markets make better products
Businesses in competitive markets will look to innovate in order to differentiate their product from competitors, often by focusing on qualityto attract a larger pool of customers
Why do firms in competitive markets use promotion tactics?
Promotion:
Businesses in competitive markets may use promotional tactics such as sponsorships, advertising and branding to encourage customers to buy their products.
Why do firms in competitive markets focus on placement?
Businesses in competitive markets may focus on ensuring their products are in the right location and on sale at the best times to gain competitive advantages.
What are the advantages of competitions for firms?
Since they are always trying to compete with other firms, firms will produce things to a higher efficiency which will lead to more customer satisfaction. Additionally, this will attract a large pool of customers as more customerswill come to this place as there are a wide range of choices and cheaper prices or a better quality of the product
What are the disadvantages of competition for firms?
They will be forced to sell it at a lower price which can lead to less profit which can lead to a potential business failure. This can also lead to a low market share.
What are the advantages of competition for consusmers?
Cheaper prices and more goods in the same area which can lead to more choices
What are the disadvantages of competition for consumers?
There could be lower quality if the firm is trying to lower their price.
What is the benefit of competition for the economy?
This could lead to prices remaining more stable. This could also lead to a lot of tax revenues and job creation.
What are the disadvantages of competition for the economy?
Lack of protection for small companies which could not afford this high competition which can lead to failure. This can also lead to an inefficient allocation of resources. This can also lead to lower quality goods in the economy and less tax revenues if firms are selling lower quality goods at lower prices.
Competition
Competition is the rivalry that exists between firms when trying to sell goods to the same group of consumers.
What are Barriers to entry?
BARRIERS TO ENTRY are obstacles that might discourage a firm from entering a market.
What is innovation?
Innovation is the commercial exploitation of a new invention
What is Product differentiation?
PRODUCT DIFFERENTIATION is the attempt by a firm to distinguish its products from that of a rival.
