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Influences on Business

Competition, risk and uncertainty

  • 3 things to know
  • Both papers

Overview

Markets and competition, monopolies and inefficiency, risk against uncertainty, profit as the reward for risk, reducing risk through research, insurance and a product range, and responding to a large new rival.

What you need to know

Answer each one before you reveal it.

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Key term

What is a market?

Key term

What is competition?

Key term

How does strong competition affect a business?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is a market?

    Model answer

    A market is any place or system where buyers and sellers meet to exchange goods and services. A market can be a physical place or online.

  2. 2

    What is competition?

    Model answer

    Competition is rivalry between businesses selling similar products to the same customers. Competitors try to win customers from each other.

  3. 3

    How does strong competition affect a business?

    Model answer

    A business facing strong competition may have to cut prices, which reduces profit margins. The business must also work harder on quality, service and new ideas.

  4. 4

    How can competition benefit customers?

    Model answer

    Competition pushes businesses to lower prices and improve quality. Customers also get more choice.

  5. 5

    What is a monopoly?

    Model answer

    A monopoly is a market with only one business supplying the product. A monopoly can often charge higher prices because customers have no alternative.

  6. 6

    In what situations might a business face little or no competition?

    Model answer

    A business may face little competition if a patent protects its new invention. A village shop miles from rivals or a firm in a small niche market may also face little.

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The pays a fee and a share of revenue.
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AThe business pays more interest on the money it owes.
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