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Economics IGCSEPDF 75
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often pursued alongside profit,
particularly by large, visible firms.
This topic covers the effect of having a high
number of firms on price, quality, choice,
and profit.
● Effect on Price: High competition
means firms are price takers or
have very little control over price.
Prices are generally lower as firms
compete to attract customers.
● Effect on Quality: Competition
encourages firms to improve
quality and service to differentiate
their product and retain customers.
● Effect on Choice: A high number of
firms leads to a wide variety of
products and services, giving
consumers a large choice.
Effect on Profit: Intense
competition generally leads to lower
profit margins for firms, especially
in the long run, as the high number
of rivals drives prices down towards
average cost.
●
This topic covers the characteristics,
advantages, and disadvantages of a
monopoly.
Characteristics of a Monopoly
●
A
market where one firm supplies all or
a very high percentage of the market
output (e.g., typically defined as over
25% or 50% market share).
High Barriers to Entry: Significant
obstacles prevent new firms from
entering the market, such as very
high start-up costs, legal barriers
(patents), or control over essential
resources.
●
● Price Maker: The firm has the ability
to influence the price by controlling
the quantity of output it supplies.
3.8 Market structure
3.8.1 Competitive Markets
3.8.2 Monopoly Markets
SingleSeller/Dominant Firm:
Note: The theory and diagrams of perfect
and imperfect competition are not required.