Unit 3: Chapter 14

In business, competition is very common. Businesses that offer similar products or services will naturally generate competition. Competition is often beneficial to the customer, as businesses will lower their prices in order to win over customers. Customers will usually buy from the cheapest source, as long as the quality is similar. This will often create a loop of businesses lowering prices as much as possible in order to try to beat the competition. The money lost from selling a cheaper product can usually be made up by the volume of sales. Another way a business can get the upper hand is through innovation. The latest advancements in technology can make a product better. Innovation can also make a product cheaper to produce, allowing for a product to be priced lower than the competition. Competition in business is generally good for the consumer, but causes businesses to have to work harder.

Competition between businesses isn’t the only type of competition, sometimes there is competition between consumers. When a business has a low supply of a product that many people want, consumers will compete for a chance to buy one. Competition between consumers has the opposite effect of competition between businesses, and allows businesses to increase their prices. Competition between consumers is usually bad for the consumer, but good for businesses.

When choosing the price of a product or service, a business has to be careful. If the price is too high, not enough people will be willing to pay. If the price is too low, the profit margins may not be enough to sustain the business. Every business has operating expenses, which are how much money it costs just to run a business. In order to make a profit, a business has to make more money than is required to pay off these expenses. Making a profit is one of the most important things in a business. If a business is unable to make a profit, then it is likely going to fail. Profit is what allows businesses to grow and experiment with new things. In the end, it is up to the business to do whatever they want with their profit.

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