Listen to Coach Thomas Characteristics of Competitive and Less Competitive Markets • Competition makes athletes improve by pushing them to do better. Competition does the same thing to businesses. • Competition - Attempts by two or more individuals or organizations to acquire the same goods, services, or productive and financial resources. Consumers compete with other consumers for goods and services. Producers compete with other producers for sales to consumers.
Listen to Coach Thomas Characteristics of Competitive and Less Competitive Markets • Businesses work to produce better products at lower prices in order to attract customers. • Consumers benefit from this. • Businesses also benefit from competition when they can choose to buy their supplies from a variety of competing sources, which keeps their costs down. • Some industries are more competitive than others.
Listen to Coach Thomas Characteristics of Competitive and Less Competitive Markets • Barriers to entry - Factors that restrict entry into an industry and give cost advantages to existing firms. Examples would include the large size of existing firms, control over an essential resource or information, and legal rights such as patents and licenses.
Listen to Coach Thomas Examples of Barriers to entry • Economies of Scale- This means as firms produce more their average costs fall. Therefore, it is difficult for new, small firms to enter the market and be competitive. • Brand Loyalty - Some firms have high degrees of brand loyalty. This means consumers are loyal to the existing brand and firm. It means that a new firm would have to spend a lot of money on advertising to create its own brand loyalty
Listen to Coach Thomas Examples of Barriers to entry • Geographical Barriers- Some Industries are specific to a certain area. This means that new firms cannot enter unless they have access (e.g. mining industries) • Patents- This is a legal barrier which prevents other firms using that particular technology. It can be an effective way to prevent competition.
Listen to Coach Thomas Vocabulary Quiz Tomorrow on these words: • Demand • demand schedule • dividend • elasticity of demand • elasticity of supply • equilibrium quantity • IPO • law of demand • law of supply • Price • price floors • primary market • shortage • stock market • Supply • surplus