Question

What are the main factors that affect the amount of business competition?

Answer 1

Answer:

From a microeconomics perspective, competition can be influenced by five basic factors: product features, the number of sellers, barriers to entry, information availability, and location. Each factor hinges on the availability or attractiveness of substitutes and, when no alternatives exist and the company is a single seller of a unique product, a monopoly exists and there is zero competition.

Explanation:

• When a company has a unique product that no other company is selling, a monopoly exists, as there is no competition.
• Most markets are somewhere in between competition and a monopoly.
• The amount of competition will also vary depending on location, the barriers to entry, and the availability of pricing information.

Alternatively, a product might be completely differentiated, meaning that it is unique. If so, there might be few alternatives and thus low levels of competition. The level of differentiation is largely a subjective matter and subject to consumer opinion.

The number of sellers also impacts competition. If there are many sellers of an undifferentiated product, competition is considered to be high. If there are few sellers, competition is low. If there is a single seller, the market is considered a monopoly.

Answer 2

From a microeconomics perspective, competition can be influenced by five basic factors: product features, the number of sellers, barriers to entry, information availability, and location.