How small firms compete

How small firms compete

Courses Info

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes

In Competitive Markets

  • Product Differentiation and Unique Selling Point – this allows small firms to edge out in the market
  • Competitive Advantage – they can achieve competitive advantage through relationships with their stakeholders
  • Economies of Scale – if small firms can benefit from economies of scale, they will have lower costs of production and greater efficiency
  • Diseconomies of Scale – larger firms are likely to have more diseconomies of scale if there is poor management, problems with coordination and communication. This will result in higher costs and x-inefficiency, potentially leading to higher wages
  • Small firms as Monopolists – small firms may create a niche market where they can charge higher prices due to the inelastic demand their goods / services possess. Small firms also have a small degree of monopoly power since they provide a more personal and local service


Quick Fire Quiz – Knowledge Check

1. Identify and explain five ways small firms can compete in competitive markets (15 marks)


Next Revision Topics


A Level Economics Past Papers

Tushar Depala

Author: Tushar Depala

Economics Tutor

View Profile Hire Tushar Depala