A mobile catering van sells a standard lunch at the going price in a market where many other vans offer close substitutes. Customers can see the prices charged by the vans. The owner reduces the van's price below the going price to attract more buyers.
What is most likely?
The van becomes a price maker because its sales are higher than those of rival vans
The van keeps its extra buyers in the long run because buyers switch to the cheapest seller
Rival vans match the lower price, so the market price may fall without a lasting advantage for the van
The van can later raise its price because buyers become loyal to its temporary discount
149 exam-style questions on AQA GCSE Economics 1.5 Competitive and concentrated markets, covering 1.5.1a The range of market structures, 1.5.1b Distinguishing between market structures, 1.5.2a Characteristics of a competitive market, 1.5.2b How producers operate in competitive markets, 1.5.2c The economic impact of competition, 1.5.3a Characteristics of a non-competitive market, 1.5.3b How producers operate in non-competitive markets, 1.5.3c Monopoly and oligopoly, 1.5.4a The labour market and wage determination, and 1.5.4b Gross and net pay. Each one has a worked solution and a mark scheme showing where the marks go.