Unit 2.6 - Competitive environment

Question 1

Define market

Answer 1

A market exists where there are buyers and sellers

Question 2

Define perfect competition

Answer 2

A market where there are a number of buyers and sellers, selling a similar product or offering a similar service

Question 3

Define oligopoly

Answer 3

A market where there are a number of businesses but dominated by a few larger businesses, selling different products or different services which can be advertised to appear different

Question 4

Define monopoly

Answer 4

A market where there are is a single business selling a product or offering a service

Question 5

Characteristics of a competitive market (3)

Answer 5

Large number of producers
Large number of consumers
Known as a perfectly competitive market

Question 6

Characteristics of a non competitive market (2)

Answer 6

Few or single producers

Known as a monopoly

Question 7

Features of a competitive market (4)

Answer 7

Prices are low and similar or customers will go elsewhere
Compete on non price factors to gain customers
Lots of money spent on developing products to gain more customers
Lots of firms producing the same product - likely to be low profits

Question 8

Little or no competition (3)

Answer 8

Get most if not all of the customers
Can be a niche product/market
Hard to get into these markets as there will be high start up costs

Question 9

Difference between risk and uncertainty

Answer 9

Risk is the possibility of something going wrong whereas uncertainty there is a lack of information so unsure what is going to happen