economics - competition

• competition - where different are trying to sell a similar product to a consumer
• producers compete

  • to enter a market
  • to survive in a market
  • to make a profit
• non - price competition

  • offering a specialist product
  • unique selling point
  • better quality
  • advertising (brand/reputation)
  • leads to consumer loyalty
• price competition

  • firms lower their prices to gain consumers and market share
  • more likely to happen where there are a large number of firms
• monopoly = one firm dominates the whole industry, no close substitutes
• oligopoly = few firms dominate an industry, some close substitutes
• monopolys occur when a firm has a large market share (at least 25%) and can set prices as they wish
• oligopolies can try to control the market through collusion, they agree to set the price so they avoid price competition - this is illegal