Markets and competition

1. Markets and competition

2. Markets and competition A market is a system for bringing together buyers and sellers of specific products Different products have different types of market with different market conditions

3. Markets and competition In some markets there are many suppliers and many buyers In this case buyers have a wide choice of suppliers to buy from and will buy from the supplier who offers the best product and the best quality at the best price (i.e. value for money) Suppliers must therefore compete on the basis of product, quality and price and competition is said to be fair

4. Markets and competition Unfair competition arises when there is anti-competitive behaviour by suppliers that acts against the public interest. This includes Cartels Monopolies Restrictive practices Collusion between companies on factors such as prices, quality or quantity of supply

5. Markets and competition In the UK unfair competitive behaviour is regulated by the Office of Fair Trading Monopolies are regulated by the Competition Commission who will investigate any situation (such as a take-over) which may result in a monopoly

6. Capacity The capacity of a business is the amount the business can produce within a given time using existing resources; this depends on Numbers and skills of employees Technology used The production process Level of investment

7. Capacity utilisation The greater the capacity utilisation of the business, the lower the cost of producing one unit of product Some excess capacity allows flexibility Too many suppliers in a market may lead to too much excess capacity so that some businesses have to reduce capacity, for example through rationalisation