In my essay practise revision notes, I took all of the past paper questions from previous years and split them up into sub-questions to help me to formulate paragraphs based on different concepts and arguments that I could memorise for the exam. The document will include my own style of writing and...
ESSAY PRACTICE - Competition,
Alternative Perspectives
1) What is Competition, where does it come from, and
what does it mean for the economy if there is
competition? Describe the issues of defining
competition in economic theory.
Competition is difficult to define in economic theory with so many
contrasting views. From my perspective, I can infer that competition is
the situation in which firms consider one another’s characteristics and
advertising and compete on price or quality of products for instance, in
order to win over more customers to achieve higher profits and to attract
capital so that their businesses can succeed in a Capitalist economy. I
believe that in markets, competition causes weaker firms to exit the
market so that stronger businesses can grow and boost GDP growth.
As a result, competition leads to greater market power for the strongest
firms and higher efficiency in the economy, explaining technological
change in recent years. According to economists, competition is
supposed to be a feature of capitalist economies, but its meaning
continues to be disputed between schools of thought.
2) What is the Orthodox view of Competition?
Orthodox economists feel very strongly about their model of perfect
competition. They believe that the most ideal case of competition is
perfect competition. A perfectly competitive market consists of firms that
are price-takers with no market power and no rivalry. Rivalry refers to
the existence of rivals, few in number and known to each other so that
conscious reaction to one another’s actions is possible. Also, the
equilibrium of a perfectly competitive market is said to be pareto efficient
and based on market clearing where firms are competing on price.
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