What is Competition? Competition refers to the rivalry between firms in a market to attract customers and maximize profits. The degree of competition in a marke...
Competition refers to the rivalry between firms in a market to attract customers and maximize profits. The degree of competition in a market depends on factors like the number of firms, barriers to entry, and product differentiation.
In a perfectly competitive market, there are many firms selling identical products with no barriers to entry/exit. Firms are price takers, and competition keeps prices low, benefiting consumers.
A monopoly exists when a single firm has complete control over a market, with no direct competitors. Monopolies can charge higher prices, restricting consumer choice and leading to a deadweight loss for society.
Higher competition gives consumers more choice in products, prices, and quality. It incentivizes firms to innovate and cater to diverse preferences.
In competitive markets, firms aim to keep costs low and produce at maximum efficiency to undercut rivals. This results in lower prices for consumers.
To gain a competitive edge, firms invest in research and development to create new or improved products, benefiting consumers.
Governments aim to promote competition through policies like:
Problem: Compare the impact of a monopoly and a perfectly competitive market on consumer choice and prices.
Solution:
For more information on competition in markets, refer to the OCR GCSE Economics specification and BBC Bitesize guides.