General

Question 1

What is competition?

Answer 1

Where different firms are trying to sell a similar product to the same consumer.
( Takes the form of both price and non-price factors e.g.

Marketing

Quality

Customer service)

Question 2

What happens in a competitive market?

Answer 2

• a large number of producers compete with
  each other to satisfy the wants and needs of a large number of consumers.
  -no single producer, or group of producers, can decide how the market operates.

Equally, not individual consumer, or group of consumers, can determine the price or quantity of goods and service in the market

Question 3

Why do producers compete?
(Competition between producers
takes place because they are
trying to achieve objectives such
as profit maximisation or
increased market share. It also
helps to increase efficiency, as
they do whatever they can to
reduce their costs of production
(to reduce prices for consumers or
to maximise profits!)

Answer 3

To enter a market

To survive

To make a profit

Question 4

What is price competition?

Answer 4

Firms lower prices to gain customers and thus increase market share.
-This can be a short run strategy as firms cannot sell at less than cost-price for any length of time as this will also result in them going out of business.
- likely to take place where
there are a number of larger firms e.g. cars

Question 5

What is non price competition?

Answer 5

Smaller producers can often compete by
-offering a specialist product,convenience
-better and more personalised consumer service, and small shops are able to exist because of these factors. -These also help gain consumer loyalty. One of the most common ways of on
non-price competing is advertising. Offering these factors can help
build a brand; consumers are often willing to pay a higher price for a
brand they know and trust.