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Exploring how competition helps keep prices low and affordable for consumers.
Imagine you have 10 and the store next door sells it for $8, which one would you choose? Why would the second store offer a lower price?
In economics, competition happens when two or more businesses try to sell the same types of goods or services to the same customers. Think of it like a game where the prize is your money! To win, businesses have to give you a reason to pick them over someone else. The most common way they do this is by lowering their price. If Store A and Store B both sell the same toy, but Store B sells it for less, most people will go to Store B. This 'battle' between stores is great for you because it keeps things affordable.
1. Sarah sells lemonade for 0.75. 3. To get her customers back, Sarah lowers her price to 1.00 - 0.50 = $0.50 cheaper than her original price.
Quick Check
If two stores sell the exact same video game, why might one store make their price lower than the other?
Answer
To attract more customers and beat their competition.
When you look at different stores to find the best price, you are shopping around. This is a superpower for consumers! By comparing prices, you force businesses to stay competitive. If everyone just bought from the first store they saw, that store could charge whatever they wanted. But because you have the choice to go elsewhere, businesses must keep their prices fair. In a competitive market, the consumer (that's you!) usually gets the best deal.
You want a pair of 'Super-Jump' sneakers. 1. Shoe World sells them for 50, but gives you a 50 - 10 = . 4. Step 2: Compare 40 (Foot Locker). 5. Result: Foot Locker is the better deal because .
Quick Check
What is it called when a buyer looks at many different stores to find the lowest price?
Answer
Shopping around.
Competition doesn't just lower prices; it also makes products better. If two pizza places have the same low price, they might compete by making their pizza taste better or delivering it faster. This means you get better quality for your money. Without competition, a business might become 'lazy' because they know you have no other choice. In a healthy economy, competition keeps businesses working hard to make customers happy.
You are buying 3 pizzas for a party. 1. Pizza Palace: 9 per pizza. 3. Calculate Pizza Palace: You pay for 2 pizzas: 2424. 4. Calculate Slice Heaven: 2724 < 27$. Pizza Palace wins!
What is the main reason a store would lower its prices during a 'price war'?
If Store A sells a backpack for 20, how much do you save by shopping at Store B?
Competition is generally bad for consumers because it makes choices too difficult.
Review Tomorrow
In 24 hours, try to explain to a friend why having five different grocery stores in one town is better for your wallet than having only one.
Practice Activity
Next time you go to the store with an adult, look for two different brands of the same item (like cereal or soap) and compare their prices to find the best deal.