Topic Two: Market Structure.

How Does Market Structure Effect Firms:
Competititve Markets 

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How Comp Effects Markets:

-Competiton: is a powerful stimlus, have to work harder to attract customers

-Competition can help to keep prices down

-In a competitive market businesses cannot charge more than rivals- they wont do well!

-Businesses in comp markets have to control costs to make a profit!

-Profit = Sales Revenue - Costs

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Productive Effiency

In competitive markets businesses need to:
                                                                    minimise costs
                                                                    accept market price 
                                                                    keep up with development

Operating at minimum costs means high effiency & no waste

Allocative Effiency:

businesses compete to get the resources they need.
resources = a business cost!

Allocative Effiency occurs when resources are allocated between competing areas in a way that matches the requirement of the consumer to the greatest possible extent.

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