Focus Question: Does Competition Among Sellers Lower Costs?

Topics on the Page

 
Competition and Costs

 
Unfair Competition

 
Anti-Trust Legislation

 
Consumers and Choice

• Uncle Nearest 1856 Whiskey
• Food Deserts

What is competition and how does it lower costs?
"When two or more businesses sell the same goods or service, they are competing for the same market.

When businesses compete, they try to find ways to get the consumer to choose them.

Buyers get to choose where to spend their money. This is competition in the marketplace." [1]

In order to convince a buyer to purchase, businesses need to cater to the buyers' needs such as affordability, product quality, customer service, branding, etc, thus buyers competing with other buyers must offer the best product and at the best price for customers, which can lower costs for the buyers.

• From the Federal Trade Commission: "Competition in America is about price, selection, and service. It benefits consumers by keeping prices low and the quality and choice of goods and services high." [2]

To better understand how competition works through supply and demand, click here to watch a Crash Course Economics Video.



To learn more about "Perfect Competition," in which there are large numbers of identical suppliers and demanders of the same product, buyers and sellers can find one another at no cost, and there are no barriers to prevent new suppliers from entering the market, watch this video

For a lesson plan on how competition among sellers results in lower costs and prices, higher product quality, and better customer service, click here

Click here to access and extensive workshop lesson plan on teaching students how markets work

To read an article from the International Monetary Fund (IMF) on Supply and Demand: Why Markets Tick, click here

Anti-Trust Legislation

• Below is the famous political cartoon above is seen as helping the passage of anti-trust legislation by Congress.

The Bosses of the Senate, 1889

What happens when competition becomes unfair?

*Unfair competition is when firms are not competing on equal terms because some or all firms are colluding to maintain a certain price or when a firm is practicing anti-competitive practices such as predatory pricing.

Antitrust laws are designed to protect competition and fairness in the marketplace.

The Federal Trade Commission is tasked with enforcing antitrust laws by "challenging business practices that could hurt consumers by resulting in higher prices, lower quality, or fewer goods or services." [2]



Watch this Crash Course Economics Video to learn more about predatory pricing and price gouging and how difficult predatory pricing lawsuits are to win 


Here is a lesson plan on unfair competition in the pharmaceutical industry: http://www.fairfightfilm.org/lessons/lesson4.pdf

Uncle Nearest 1856 Whiskey

Nearest Green: The Man Who Taught Jack Daniels About Whiskey. NPR (September 3, 2017)


About Nearest Green

Illusion of Choice: How much choice do consumers really have?

It's important to get students to think critically about consumer "choice" because while it may seem like there are plenty of options, the bigger picture is that choice is limited and constructed.

• Take the fast food industry for example and the "choices" that low-income people of color have regarding their diet. Or investigate the media as an example.
• It might seem like we have plenty of options when it comes to TV channels, radio shows, newspapers, but the truth is that there only a handful of companies that control the media content, production, and distribution to consumers.

Food Deserts: Illusion of Access

To read about how the market influences the creation of "Food Deserts" in low resourced, urban communities from the Agricultural and Applied Economics Association click on An Evaluation of Food Deserts in America