A small producer of bicycle lights sells through a global online marketplace. It can advertise at low cost, but customers can compare hundreds of similar im...
Question 1 Report
A small producer of bicycle lights sells through a global online marketplace. It can advertise at low cost, but customers can compare hundreds of similar imported products.
(a) Which effect of globalisation is likely to increase competition for the producer? [1]
(b) Use the scenario to explain why the producer may find it difficult to increase its price. [2]
Answer Details
(a) Globalisation increases competition by giving the producer greater access to foreign competitors and imported products through the online marketplace. [1]
(b) Customers can compare hundreds of similar products from many sellers. [1] If this producer raises its price, customers may switch to a cheaper imported or domestic alternative, reducing its sales. [1]
Low-cost advertising may help the firm reach customers, but it also operates in a market where buyers can compare alternatives easily.
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