Unit 2 Flashcards
fixed costs
do not vary with the level of output
variable costs
costs that change in proportion to the level of goods or service a business produces
bulk purchasing
the business can buy materials in larger quantities at a discount, reducing cost/unit
operational efficiency
with more production, the business can optimise its production process, reducing time and waste/product
economies of scale
Monopolies can achieve economies of scale, meaning they can produce goods or services at a lower cost/unit due to their large scale of production
oligopoly
An oligopoly exists where a market is dominated by a few firms. Eg phone networks.
competitive market
a large number of firms
don’t compete on price
no barriers to entry
very little product differentiation
example: farm and dairy
monopoly
one firm in the market
high ability to control price
regulation - government regulation
no products competing
example: utilities, gas
monopolistic competition
many sellers
limited ability to control price
few barriers to entry
lots of product differentiation
mobile phone networks, airlines
ways to increase market share:
discounts
advertising/ promotion
change pricing strategy
merge with competitor
market research
market power
the ability of a firm to influence or control the terms and conditions on which goods are bought and sold
market dominance
a measure of market share compared to competitors
barriers to entry
the factors that could prevent a firm from entering and competing in a market
merger
where teo companies join together to form a new, larger business
acquisition/ takeover
this is where control of another company is achieved by buying a majority of its shares (external growth)
hostile takeover
board rejects offer
goes to shareholders
may still be bitterly contested and costly
the board could leave
(external growth)
benefits of a hostile takeover
neew management with different skills and talents
increase in revenue and market share
meet customer needs more effectively
experience economies of scale
CMA
competition and markets authority
what does the CMA do
ensures that competition and markets work in favour of consumers
what fines can the firm experience
10% of global turnover
prison time
market
a situation where buyers and sellers and in an environment to discuss the price of a product
demand
the amount of a good/service that customers and willing and able to buy at any given price
supply
the amount of a good/service that sellers are willing and able to sell at any given price
