Competition: rivalry between firms

Competitive market: large no. of producers complete

• satisfy wants/ needs of consumers
• x single producer/ consumer can dictate market/ price

Features

• large number of buyers/ sellers
• close substitutes products
  • homogeneous/ less differentiated
• low entry barriers: easy to break into
  • x technically difficult
  • x require capital
• x control over price
  • charge ruling market price
• free low of info:
  • nature of products
  • price
  • method of production
  • cost
  • availability of factors

Firms

• Threat

  → price ↓

  → pressure ↑

  → effort ↑

• provide products that give consumer value for money

  • low costs → operation efficiency
  • good quality
  • acceptable prices
  • innovating: review/ improve
    • product differentiation

• limited profit

  • fierce competition → low price → low profit

Consumer

• price ↓

• choice ↑

• quality ↑

• market uncertainty

  • unprofitable firms leave → inconvenience

Economy

• efficiency → survive

  • low costs → maintain low price
    • cheapest resource
    • efficient production method

  → x wasted resource

• innovative → competitive

  • develop new products. techniques/ technologies/ material

  → better standard

• waste resource

  • immobility:

    • stop trading: resource → other use

    • redundant people/ resources

      → reallocated: wasted time

      → scrapped: wasted resource