Competition and Concentration. Concentration writ large. There are hundreds of millions of business and companies in the world Yet the largest 1000 companies produce 80% of the worlds industrial output In the US, about 1200 companies produce more than 50% of the GDP.
Three-fourths of 531 corporations surveyed identified economic pressures from competitors as one of the primary factors motivating their restructuring efforts.
1. Businesses must compete for profits, and they do so by manipulating the determinants of their own profit rates.
2. Business competition takes three principal forms: (a) price competition) (b) breakthroughs; and (c) achieving monopoly power.
3. For all three types of competition, firms must invest to compete.
4. Because firms must invest to compete, competition is inherently dynamic:
5. The competitive scramble produces different profit rates among firms; but, conversely, it also tends to equalize profit rates
6. The dynamics of competition produce both economic concentration (which results when large firms displace or acquire smaller firms) and decentralization
There is a relationship between the Price of the output and the capacity
We know from the law of demand that if the price is lowered, more output can
Rearranging this term, we have
Price= unit material cost+unit wage cost+unit profit
Unit profit is sometimes called markup
There is a tendency for funds to flow into industries where profit rates are high
lowering relative profits..