NCEA Level 1 Business Studies Practice Test

Question: 1 / 400

How does competition typically affect consumer prices?

Prices generally increase

Prices may decrease

Competition among businesses generally leads to lower prices for consumers. When multiple companies offer similar products or services, they strive to attract customers by pricing their offerings attractively. This competition encourages businesses to lower their prices to gain market share, which can result in better deals for consumers. At the same time, if one company lowers its prices, others may feel pressured to do the same in order to remain competitive.

This competitive behavior can lead to overall price reductions in the market, benefiting consumers with more affordable choices. Additionally, competition can drive innovation and improvements in product quality, as businesses seek to differentiate themselves through superior value, further enhancing the consumer experience.

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Prices remain constant

Prices fluctuate randomly

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