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services. The location can be physical, such as a shop, or digital, such as an online platform."},{"text":"Businesses and employees come together to discuss wages and working conditions.","correct":false,"explanation":"This describes an employment relationship rather than a market for goods or services. A market requires buyers and sellers exchanging a product or service."},{"text":"Producers and regulators come together to set legal prices for every product.","correct":false,"explanation":"Regulators may influence markets, but they are not essential participants in every market. The defining feature is buyers and sellers trading goods or services."},{"text":"Customers and advertisers come together to create promotional campaigns for a brand.","correct":false,"explanation":"Advertising can influence customer choices, but creating promotional campaigns does not define a market. Markets are formed through the exchange between buyers and sellers."}]},{"id":"cf326f01-e846-413c-8096-cb25d90d68b7","cardType":"basic","points":2,"front":"Why is competition an external influence on a business?","back":"The business does not decide how many rivals it has, what they charge or when they open.","mcqOptions":[{"text":"The business does not decide how many rivals it has, what they charge or when they open.","correct":true,"explanation":"Competition is external because rival businesses and their decisions are outside the individual business's direct control. Their number, prices and opening times can still affect its performance."},{"text":"The business does not decide how many employees it has, what they earn or when they work.","correct":false,"explanation":"These are mainly internal staffing decisions, so they do not explain competition as an external influence. The correct explanation concerns rivals' numbers, prices and opening times."},{"text":"The business does not decide how many customers it has, what they buy or when they visit.","correct":false,"explanation":"Customer behaviour is also an external factor, but this answer does not define competition specifically. Competition concerns rival businesses and the choices they make."},{"text":"The business does not decide how many products it makes, what they cost or when they sell.","correct":false,"explanation":"Production and pricing are usually decisions made by the business itself. Competition is external because other businesses determine their own number, charges and opening times."}]},{"id":"dd68dbb3-2818-4373-bcd9-e709ee5d1a08","cardType":"basic","points":2,"front":"What makes competition particularly strong in a market?","back":"

There are many rivals.
Their products are very similar.

","mcqOptions":[{"text":"

There are many rivals.
Their products are very similar.

","correct":true,"explanation":"Competition is strongest when many businesses are trying to attract customers and their products are close substitutes. Customers can then switch easily between rivals."},{"text":"

There are few rivals.
Their products are very similar.

","correct":false,"explanation":"Similar products make switching easier, but having few rivals limits competitive pressure. Strong competition requires many businesses competing for the same customers."},{"text":"

There are many rivals.
Their products are very different.

","correct":false,"explanation":"Many rivals increase pressure, but very different products are less direct substitutes. Competition is particularly strong when the products are also very similar."},{"text":"

There are few rivals.
Their products are very different.

","correct":false,"explanation":"Few rivals and strongly differentiated products both reduce the ease of switching. Neither condition creates the intense direct competition found in a crowded market with similar products."}]},{"id":"add7e44a-3686-4723-bf17-b05aecffae0b","cardType":"cloze","points":null,"front":"Competition is the [ ] between businesses selling similar products to the same customers.","back":"Competition is the rivalry between businesses selling similar products to the same customers.","mcqOptions":[{"text":"rivalry","correct":true,"explanation":"Rivalry means businesses compete against one another for the same customers, usually by changing prices, improving products or offering better service."},{"text":"cooperation","correct":false,"explanation":"Cooperation means working together, which is the opposite of businesses competing for customers. The correct term for this competitive relationship is rivalry."},{"text":"ownership","correct":false,"explanation":"Ownership identifies who controls a business or asset; it does not describe businesses competing to sell similar products. The missing term is rivalry."},{"text":"distribution","correct":false,"explanation":"Distribution concerns moving products from producers to customers. It does not describe competition between businesses, which is called rivalry."}]},{"id":"41edcff7-9205-45a7-9487-9824914e6c0e","cardType":"basic","points":2,"front":"Why does strong competition put pressure on a business's prices?","back":"Customers can compare similar products quickly, so charging much more risks losing sales.","mcqOptions":[{"text":"Customers can compare similar products quickly, so charging much more risks losing sales.","correct":true,"explanation":"When customers can compare close substitutes easily, a significantly higher price may cause them to switch to a rival. This makes competition a direct pressure on pricing."},{"text":"Customers can compare completely different products quickly, so charging much more guarantees higher sales.","correct":false,"explanation":"Different products are harder to compare directly, and a higher price does not guarantee more sales. Similar products make switching to a cheaper rival more likely."},{"text":"Customers can ignore similar products completely, so charging much more prevents rivals competing.","correct":false,"explanation":"Customers generally compare similar products when making purchasing decisions. Ignoring rivals would remove the price pressure rather than explain why it exists."},{"text":"Customers can compare business costs quickly, so charging much more always increases profit.","correct":false,"explanation":"Customers usually compare products, prices and perceived value, not a business's private costs. A higher price may reduce sales if rivals offer similar products more cheaply."}]},{"id":"d635c95d-f6c9-4446-81c9-9570f28a9840","cardType":"basic","points":2,"front":"Why can strong competition reduce the profit made on each sale?","back":"Prices fall while the cost of competing rises, creating thinner profit margins.","mcqOptions":[{"text":"Prices fall while the cost of competing rises, creating thinner profit margins.","correct":true,"explanation":"Rivals can force prices down while businesses spend more on promotion, quality or service. Lower revenue per sale and higher costs reduce the profit margin."},{"text":"Prices rise while the cost of competing falls, creating thinner profit margins.","correct":false,"explanation":"This reverses the usual competitive pressure: strong rivalry commonly pushes prices down and raises spending on improvements or promotion. Those pressures, not rising prices and falling costs, thin margins."},{"text":"Prices stay fixed while the cost of competing disappears, creating thinner profit margins.","correct":false,"explanation":"Competition does not make competitive costs disappear, and fixed prices alone do not explain falling margins. Prices may fall while spending to keep up with rivals increases."},{"text":"Prices fall while the cost of competing falls, creating wider profit margins.","correct":false,"explanation":"The price effect is correctly identified, but falling competitive costs would tend to protect or widen margins. Strong competition usually increases costs as well as reducing prices."}]},{"id":"335cb169-5f96-4437-9191-da20df91e133","cardType":"cloze","points":null,"front":"When products are nearly identical, such as petrol or milk, [ ] does most of the competing.","back":"When products are nearly identical, such as petrol or milk, price does most of the competing.","mcqOptions":[{"text":"price","correct":true,"explanation":"When products are almost identical, customers can switch easily and usually choose the cheaper option. Businesses therefore compete mainly through price."},{"text":"branding","correct":false,"explanation":"Branding can create differences between products, but identical basic goods give customers little reason to choose one brand beyond its price. Price is the main competitive tool here."},{"text":"packaging","correct":false,"explanation":"Packaging may influence presentation, but it is usually a minor distinction for nearly identical essentials. Price has the strongest effect on customers' choices."},{"text":"location","correct":false,"explanation":"Location can matter for convenience, but it is not the main basis of competition when the products themselves are nearly identical. Price usually drives the comparison."}]},{"id":"627f6452-f581-40e9-920f-97b1f8e9f42b","cardType":"basic","points":2,"front":"How can competition pressure a business to improve quality and service?","back":"A rival's improvements make features such as faster delivery, easier returns or better-trained staff necessary.","mcqOptions":[{"text":"A rival's improvements make features such as faster delivery, easier returns or better-trained staff necessary.","correct":true,"explanation":"A rival offering better service raises customer expectations. The business may need to match or exceed those features to prevent customers switching, even if this increases costs."},{"text":"A rival's improvements make features such as slower delivery, stricter returns or fewer-trained staff necessary.","correct":false,"explanation":"These changes would generally make the customer experience worse and weaken competitiveness. Rival improvements create pressure for faster, easier and more capable service."},{"text":"A rival's improvements make features such as higher prices, smaller ranges or shorter opening hours necessary.","correct":false,"explanation":"Higher prices, reduced choice and shorter hours usually make an offer less attractive. Competitive pressure normally encourages businesses to improve convenience and customer value."},{"text":"A rival's improvements make features such as less promotion, weaker guarantees or less helpful staff necessary.","correct":false,"explanation":"Reducing customer support and guarantees would make the business less competitive. Rival improvements pressure businesses to offer stronger service and a more appealing customer experience."}]},{"id":"df0fbb65-1bce-4895-b124-75c90dccbefa","cardType":"basic","points":2,"front":"Why must a business pay for promotion even if it does not increase sales?","back":"Advertising, loyalty cards and sponsorship have to be paid for whether or not they attract customers.","mcqOptions":[{"text":"Advertising, loyalty cards and sponsorship have to be paid for whether or not they attract customers.","correct":true,"explanation":"Promotional activities involve costs that are incurred when they are run. They may generate extra sales, but the business still pays even if customers do not respond."},{"text":"Rent, wages and insurance have to be paid for whether or not they attract customers.","correct":false,"explanation":"These are business overheads that may be payable regardless of sales, but they are not examples of promotion. The question concerns advertising, loyalty schemes and sponsorship."},{"text":"Packaging, delivery and stock have to be paid for whether or not they attract customers.","correct":false,"explanation":"These costs relate to producing or supplying goods rather than promoting them. Promotional spending is paid for even when it fails to attract additional customers."},{"text":"Loans, tax and equipment have to be paid for whether or not they attract customers.","correct":false,"explanation":"These are finance, government or asset costs, not promotional activities. The relevant point is that advertising and similar promotion still cost money without guaranteed sales."}]},{"id":"cbe831f2-62c4-4492-8888-223d1d4f7090","cardType":"basic","points":2,"front":"What can happen if a business stops keeping up with its rivals?","back":"It can lose customers and possibly the business itself, as HMV did when buyers moved online and then to streaming.","mcqOptions":[{"text":"It can lose customers and possibly the business itself, as HMV did when buyers moved online and then to streaming.","correct":true,"explanation":"Failing to respond to rivals or changing customer habits can reduce sales and eventually threaten survival. HMV illustrates the danger of not keeping pace with new ways to buy music."},{"text":"It can gain customers and possibly the business itself, as HMV did when buyers moved online and then to streaming.","correct":false,"explanation":"HMV's difficulty came from losing customers as music purchasing and listening moved online. Falling behind competitors and market changes threatens revenue rather than increasing it."},{"text":"It can lose suppliers and possibly the business itself, as HMV did when buyers moved online and then to streaming.","correct":false,"explanation":"The key immediate effect was customers moving to alternative ways of obtaining music, not suppliers withdrawing. Lost customers reduce sales and can endanger the business."},{"text":"It can lose customers but guarantee the business itself, as HMV did when buyers moved online and then to streaming.","correct":false,"explanation":"Losing customers reduces revenue and can threaten survival; it never guarantees that the business will continue. HMV demonstrates how changing competition can contribute to business failure."}]},{"id":"0d11bb95-608f-4375-b3fb-43759d93468c","cardType":"basic","points":3,"front":"What do customers gain from competition?","back":"

Lower prices
Better quality
More choice

","mcqOptions":[{"text":"

Lower prices
Better quality
More choice

","correct":true,"explanation":"Competition encourages businesses to offer better value to attract customers. This can give customers lower prices, improved quality and a wider range of products or services."},{"text":"

Higher prices
Worse quality
Less choice

","correct":false,"explanation":"These outcomes generally reduce customer value and make a business less attractive. Rivalry usually encourages businesses to lower prices, improve quality and offer more choice."},{"text":"

Lower prices
Worse quality
Less choice

","correct":false,"explanation":"Competition may lower prices, but businesses also have incentives to improve quality and differentiate their offers. The other two changes would reduce the benefits customers receive."},{"text":"

Higher prices
Better quality
More choice

","correct":false,"explanation":"Competition can encourage better quality and more choice, but strong rivalry usually puts downward pressure on prices. Higher prices do not represent the typical direct benefit to customers."}]},{"id":"33f445e6-b707-4315-9cb1-f24c3df8e763","cardType":"basic","points":2,"front":"Why might matching a rival's price protect sales but damage profit?","back":"It prevents price-sensitive customers switching, but reduces profit on every unit sold.","mcqOptions":[{"text":"It prevents price-sensitive customers switching, but reduces profit on every unit sold.","correct":true,"explanation":"Matching a rival can retain customers who focus mainly on price. However, if the business earns less on each sale, total profit per unit falls even when sales volume is protected."},{"text":"It prevents price-sensitive customers switching, but increases profit on every unit sold.","correct":false,"explanation":"Matching a lower rival price may protect sales, but it normally reduces the revenue earned per unit. Unless costs fall enough to compensate, profit on each unit decreases."},{"text":"It encourages price-sensitive customers switching, but reduces profit on every unit sold.","correct":false,"explanation":"A matching price is intended to discourage price-sensitive customers from switching. The profit effect is correctly identified, but the customer response is reversed."},{"text":"It prevents price-sensitive customers switching, but keeps profit on every unit sold unchanged.","correct":false,"explanation":"The price match can retain customers, but charging less leaves less revenue per unit unless costs also fall. Therefore profit per unit is typically reduced, not unchanged."}]},{"id":"5dbf70ed-367b-4090-be60-26d428189530","cardType":"cloze","points":null,"front":"A business that makes itself different from rivals so that price matters less is using [ ].","back":"A business that makes itself different from rivals so that price matters less is using differentiation.","mcqOptions":[{"text":"differentiation","correct":true,"explanation":"Differentiation means making a product or service distinct from rivals, for example through quality, design or service, so customers are less likely to choose solely on price."},{"text":"diversification","correct":false,"explanation":"Diversification means expanding into new products or markets. It does not specifically mean making an existing offer different from rivals to reduce price sensitivity."},{"text":"specialisation","correct":false,"explanation":"Specialisation means focusing on a particular product, task or market segment. The strategy described here is differentiation, which makes an offer stand out from rivals."},{"text":"rationalisation","correct":false,"explanation":"Rationalisation involves reorganising operations to improve efficiency, often by reducing waste or excess capacity. It does not describe making an offer distinct from competitors."}]},{"id":"484e092d-888d-48d4-952a-793bfd4961f8","cardType":"basic","points":2,"front":"Why might a business improve quality instead of cutting its price?","back":"Better quality can justify a higher price and build a reputation, although it raises costs.","mcqOptions":[{"text":"Better quality can justify a higher price and build a reputation, although it raises costs.","correct":true,"explanation":"Customers may accept a higher price when they perceive superior quality and trust the brand's reputation. The trade-off is that improving quality usually increases production or service costs."},{"text":"Better quality can justify a lower price and build a reputation, although it raises costs.","correct":false,"explanation":"Better quality may build reputation, but charging a lower price would make it harder to recover the higher costs. Businesses may use quality to support a premium price."},{"text":"Better quality can justify a higher price and weaken a reputation, although it lowers costs.","correct":false,"explanation":"Quality improvements generally support reputation rather than weaken it, and they commonly require extra resources. The correct trade-off is a potentially higher price alongside higher costs."},{"text":"Better quality can match a rival's price and build a reputation, although it removes costs.","correct":false,"explanation":"Quality can help build reputation, but it does not remove the costs of improving materials, production or service. Its main pricing benefit is supporting a higher price."}]},{"id":"0beedd36-d5f5-4d1c-9a14-6885a03af867","cardType":"basic","points":2,"front":"Why might a small business differentiate itself rather than start a price war?","back":"A larger rival may be able to cut prices deeper and for longer.","mcqOptions":[{"text":"A larger rival may be able to cut prices deeper and for longer.","correct":true,"explanation":"A larger business may have greater financial reserves, lower unit costs or stronger buying power. A small firm could lose money if it tries to sustain the same price war."},{"text":"A larger rival may be able to raise prices deeper and for longer.","correct":false,"explanation":"Price wars involve cutting prices, not raising them. A larger rival's advantage is often the ability to maintain lower prices for longer without the same financial strain."},{"text":"A smaller rival may be able to cut prices deeper and for longer.","correct":false,"explanation":"Small businesses can sometimes compete through a niche, but they usually have fewer resources to sustain deep price cuts. This is why differentiation may be safer."},{"text":"A larger rival may be able to cut prices briefly but never lower.","correct":false,"explanation":"The concern is that a larger rival can sustain aggressive cuts for a longer period. A brief or impossible reduction would not explain the danger of a price war."}]},{"id":"a06f6ec0-bdce-4a6e-8d99-6d54ce6c4c8b","cardType":"cloze","points":null,"front":"A business can differentiate through [ ], which rivals may find difficult to copy quickly.","back":"A business can differentiate through customer service, which rivals may find difficult to copy quickly.","mcqOptions":[{"text":"customer service","correct":true,"explanation":"Customer service can distinguish an otherwise similar offer through helpful staff, reliable support or easy problem-solving. These capabilities may take rivals time to develop and copy."},{"text":"economies of scale","correct":false,"explanation":"Economies of scale reduce average costs as output increases; they do not describe a customer-facing way of making an offer distinctive. Customer service is the relevant differentiator."},{"text":"market share","correct":false,"explanation":"Market share measures the proportion of sales controlled by a business. It is an outcome or performance measure, not a differentiation method that rivals struggle to copy quickly."},{"text":"production capacity","correct":false,"explanation":"Production capacity is the maximum output a business can produce in a period. It may affect supply, but it is not the customer service-based differentiation described."}]},{"id":"d95d9c13-acc7-423c-89db-b13bf9543f29","cardType":"basic","points":2,"front":"Why can launching a new or improved product be risky?","back":"Development ties up cash without guaranteeing that customers will buy it.","mcqOptions":[{"text":"Development ties up cash without guaranteeing that customers will buy it.","correct":true,"explanation":"Development requires money before sales are certain, so cash is tied up in research, design and production without any guarantee that customers will buy the new or improved product."},{"text":"Development reduces costs without guaranteeing that customers will buy it.","correct":false,"explanation":"Development usually requires significant spending rather than reducing costs immediately. The risk is that development ties up cash without guaranteeing that customers will buy the product."},{"text":"Development increases demand without guaranteeing that customers will buy it.","correct":false,"explanation":"Development may improve a product, but it does not automatically increase demand. The correct risk is that development ties up cash without guaranteeing customer purchases."},{"text":"Development guarantees sales without guaranteeing that customers will buy it.","correct":false,"explanation":"Development cannot guarantee sales, and this wording contradicts itself. The actual risk is that development ties up cash even though customers may not buy the product."}]},{"id":"b7dbdc01-8581-4779-9a25-d1b70f0df756","cardType":"cloze","points":null,"front":"A product protected by a [ ] may face little competition because others cannot legally copy it for a time.","back":"A product protected by a patent may face little competition because others cannot legally copy it for a time.","mcqOptions":[{"text":"patent","correct":true,"explanation":"A patent gives legal protection to an invention, preventing competitors from copying it for a specified period and therefore reducing competition."},{"text":"trademark","correct":false,"explanation":"A trademark protects a brand name, logo or symbol, not the underlying product or invention. The correct term is patent, which can prevent legal copying."},{"text":"copyright","correct":false,"explanation":"Copyright mainly protects original creative works such as written content, music or software. A patent protects an invention from being copied for a time."},{"text":"licence","correct":false,"explanation":"A licence gives permission to use something under agreed conditions, rather than automatically stopping competitors from copying an invention. The relevant protection is a patent."}]},{"id":"0ee664ae-3584-46f9-97ec-664a2254eaf9","cardType":"basic","points":2,"front":"What can a business with little or no competition charge?","back":"It can charge higher prices and earn wider profit margins because customers have few alternatives.","mcqOptions":[{"text":"It can charge higher prices and earn wider profit margins because customers have few alternatives.","correct":true,"explanation":"With few or no alternatives, customers have less ability to switch, allowing the business to charge higher prices and potentially earn wider profit margins."},{"text":"It can charge lower prices and earn wider profit margins because customers have few alternatives.","correct":false,"explanation":"Lower prices would normally reduce the profit margin per unit. Limited competition allows the business to charge higher prices because customers have few alternatives."},{"text":"It can charge higher prices and earn narrower profit margins because customers have few alternatives.","correct":false,"explanation":"Higher prices can increase the margin per unit when competition is weak. The correct effect is wider, not narrower, profit margins because customers have few alternatives."},{"text":"It can charge the same prices and earn wider profit margins because customers have few alternatives.","correct":false,"explanation":"A business with little competition may raise prices because customers have fewer alternatives. Therefore, it can charge higher prices and earn wider profit margins."}]},{"id":"f2c20e4d-a817-4297-9621-478bb1992989","cardType":"basic","points":2,"front":"Why might a business with little competition provide poorer service?","back":"Customers cannot easily switch, so there is less pressure to improve quality, range or opening hours.","mcqOptions":[{"text":"Customers cannot easily switch, so there is less pressure to improve quality, range or opening hours.","correct":true,"explanation":"Weak competition reduces customers’ ability to switch suppliers, so the business faces less pressure to improve its quality, product range or opening hours."},{"text":"Customers cannot easily switch, so there is more pressure to improve quality, range or opening hours.","correct":false,"explanation":"More pressure would usually result from strong competition. With little competition, customers cannot easily switch, creating less pressure to improve quality, range or opening hours."},{"text":"Customers can easily switch, so there is less pressure to improve quality, range or opening hours.","correct":false,"explanation":"Easy switching gives customers greater power and would increase pressure on the business to improve. The correct explanation is that customers cannot easily switch."},{"text":"Customers cannot easily switch, so there is less pressure to reduce prices, costs or profits.","correct":false,"explanation":"The issue is reduced pressure to improve the customer offering, not specifically to reduce prices, costs or profits. The relevant areas are quality, range and opening hours."}]},{"id":"d6548860-3d67-4789-9715-54698732c6cd","cardType":"cloze","points":null,"front":"High profits in a market with little competition tend to attract new [ ].","back":"High profits in a market with little competition tend to attract new entrants.","mcqOptions":[{"text":"entrants","correct":true,"explanation":"High profits signal that a market may be attractive, encouraging new entrants to join and compete for some of those profits."},{"text":"customers","correct":false,"explanation":"Customers buy products but do not enter the market as competing producers. High profits tend to attract new entrants, who may increase competition."},{"text":"suppliers","correct":false,"explanation":"Suppliers provide resources to businesses but are not necessarily competing businesses entering the market. The correct term is entrants, meaning new competitors."},{"text":"investors","correct":false,"explanation":"Investors may provide finance, but they are not the businesses entering to compete. High profits tend to attract new entrants, increasing the number of competitors."}]}]}],"examCountdown":{"examDate":"2027-05-12","paperLabel":"Paper 1"},"heading":"2.6.1 Impact of competition on businesses","title":"2.6.1 Impact of competition on businesses Flashcards","topbar":{"backHref":"/gcse/business/aqa/flashcards"},"topicSidebar":"$L35"}]}],"topicId":"dd45460e-1451-474d-8f5e-5cc7fd0339e7","walled":"$L36"}],"$L37","$L38"]