Competitive

Markets

Chapter 18
Competition is the rivalry that exists
between firms when trying to sell
goods/ services in a particular market
Milk production in Australia

Dairy is one of Australia's

most important rural
industries, producing about
8.8 billion litres of milk in
2018-19 and directly
employing approximately
46,200 people in about
6000 farms.
 Level of
competition?
Features of
competitive
markets
Features:
❖ Many buyers and sellers
❖ Products are close substitutes
❖ Low barriers to entry- financial, technical
❖ Almost no control over price
❖ Free flow of information- prices, methods of production
etc
 Euro prices for AUD 5000

Market for
Outlet Price (euro)

A 3497

currency
B 3500

C 3509

D 3492
Level of competition?
Which outlet would you E 3494

recommend for someone buying F 3496

AUD?
Competition and
the firm
Do firms welcome
competition?
Firms need to ● Operate efficiently to minimize
costs

provide: ● Quality products with good

customer service
● Charge acceptable prices
VALUE for MONEY ● Innovate constantly
Main drawback?- low levels of profit as profit
shared among many firms
Competition can be good for firms...
Competition and
the consumer
 Advantages:
● Lower prices- many alternatives
● More choice- product
differentiation, new entrants
● Better quality
But,
● Market uncertainty
● Lack of innovation
Competition and the
economy
● Effective resource allocation- firms reduce wastage
● More innovation
● Better standard of living
● But resources can also be wasted- immobile factors