OxfordAQA International GCSE Economics: Competitive and non-competitive markets (9214) – Revision Notes

These notes condense sections 3.1.5.1 to 3.1.5.3 of the OxfordAQA International GCSE Economics (9214) specification, for exams from May/June 2025 onwards. For full explanations and worked examples, read the study guide, then test yourself with the practice questions. The labour market (3.1.5.4) is not covered here. Figures are invented. Money is in zeds (Z), the currency of an imaginary Country Z.

Other useful pages: the How markets work revision notes, the course hub, the checklist and the free diagnostics.

Key definitions

Term	Meaning
Market structure	How a market is organised: number of producers, product differentiation and ease of entry
Product differentiation	Making a product different from rivals’ versions so that buyers see it as distinct
Ease of entry	How easily a new firm can start selling in the market
Market share	One firm’s sales as a percentage of total sales in the market
Competitive market	Many producers compete for the same customers; no single firm controls the price
Non-competitive market	Competition is limited because one firm or a few large firms dominate
Monopoly	A single producer in the market; loosely, a firm with a very large share (monopoly power)
Oligopoly	A market dominated by a small number of large producers
Interdependence	Each firm must predict how rivals will react before it acts
Barrier to entry	Anything that makes it hard for a new firm to join the market

3.1.5.1 A range of market structures

Markets lie along a range, not in two boxes. Use all three factors together.

Factor	Competitive end	Non-competitive end
Producers	Many	One or a few
Differentiation	Little	Large, branded or unique
Entry	Easy	Hard

Remember the trap: a market with many differentiated sellers and easy entry (bakeries, say) is still competitive.

3.1.5.2 Competitive markets

Characteristics. Many producers; similar products or small differences; easy entry and exit; buyers can compare and switch.

How producers operate. Prices close to rivals’; costs kept low; competition through quality, service, speed and location; quick response to customers.

Impact.

Group	Usual effect
Price	Lower, because overcharging loses sales
Choice	Wide
Consumers	Lower prices, more choice, better service
Producers	Thin margins, pressure to cut costs, weaker firms may leave
Workers	More openings and pay prospects, but cost pressure can limit pay or security

Why profits are lower. Chain: high profit → easy entry → more supply → lower price → lower profit. Where a few producers dominate, entry is hard, so profit lasts.

3.1.5.3 Non-competitive markets

Characteristics. One or a few producers; barriers to entry; branded or unique products; some power over price.

How producers operate. They can often set price instead of accepting it, keep profits high, and compete through branding and advertising rather than price. Oligopolists watch rivals closely and may collude, which is generally against the law.

Impact. Higher prices and narrower choice are likely, since buyers have few alternatives.

Causes of monopolistic and oligopolistic power

• high start-up costs
• economies of scale (lower unit costs for large firms)
• legal protection such as patents and licences
• brand loyalty
• control of supplies or outlets
• mergers and takeovers
• successful growth.

Consequences

For	Possible harm	Possible benefit
Consumers	Higher prices, less choice	Lower prices if scale savings are passed on
The dominant firm	Complacency, higher costs over time	High profit funds investment
Rivals	Squeezed out or kept out	Some survive in niches

Method boxes

Market share, in steps.

1. Find the firm’s sales.
2. Divide by total market sales.
3. Multiply by 100.
4. For a combined share, add the shares (or the sales) before dividing.

Profit and margin, in steps.

1. Revenue = price × quantity.
2. Total cost = cost per unit × quantity (or fixed plus variable cost).
3. Profit = revenue − total cost.
4. Margin = profit ÷ revenue × 100.

Percentage change, in steps. Change ÷ original × 100. The original is the starting value.

Average cost. Total cost ÷ output. With fixed cost F and variable cost v per unit, average cost = (F + v × output) ÷ output.

Small worked reminders

Market share. A market sells 300,000 units. A firm sells 45,000. Share = 45,000 ÷ 300,000 × 100 = 15%.

Combined share. In a market of 240,000 units, two firms sell 48,000 and 36,000. Shares are 20% and 15%, so together 35%.

Margin. A seller’s price is Z30 and its cost per unit is Z24. Profit per unit is Z6, so margin = 6 ÷ 30 × 100 = 20%.

Scale. A plant has fixed costs of Z50,000 and variable costs of Z4 per unit. At 10,000 units, average cost = (50,000 + 40,000) ÷ 10,000 = Z9. At 40,000 units it is (50,000 + 160,000) ÷ 40,000 = Z5.25. The larger plant can sell at a price that a small one cannot.

Chains of reasoning to learn

• Competition and price. Many sellers → customers can switch → a firm that overcharges loses sales → prices stay close to cost → consumers pay less.
• Barriers and profit. High start-up costs → few new entrants → existing firms face little pressure → they can keep prices high → profit stays high.
• Scale and dominance. Large output → lower average cost → the large firm can price below what a small firm can afford → small rivals leave → fewer producers.
• Oligopoly and price wars. One firm cuts price → rivals match to avoid losing sales → every firm earns less per unit → firms prefer non-price competition.
• Evaluate each chain. Say what could weaken it: a firm may fear entry, may pass on savings, or may be regulated.

Monopoly price reminder. A sole supplier raises its price from Z60 to Z66. Rise = 6 ÷ 60 × 100 = 10%. If sales are 1,000 units before and 950 after (a 5% fall), revenue goes from 60 × 1,000 = Z60,000 to 66 × 950 = Z62,700, a rise of 4.5%.

Must-know distinctions

Compare	Key difference
Monopoly and oligopoly	One producer against a small number of large ones; oligopolists are interdependent
Competitive and non-competitive	Many firms and easy entry against few firms and barriers
Large firm and monopoly	A large firm among many rivals is not a monopoly
Price competition and non-price competition	Cutting price against branding, quality, service and advertising
Profit and margin	Profit is in money; margin is profit as a percentage of revenue

Evaluation prompts

• How high are the barriers to entry, really?
• Does the firm fear new entrants even if none has arrived?
• Are cost savings from scale passed on to consumers?
• Are there rules that limit the firm’s behaviour?
• Who is affected: consumers, producers or workers? Effects may differ.

Quick self-test

1. Name the three factors used to distinguish market structures.
2. A firm sells 18,000 units in a market of 120,000. Calculate its market share.
3. A price falls from Z80 to Z68. Calculate the percentage fall.
4. A seller sells 150 kg at Z9 per kg. Its cost is Z8.20 per kg. Calculate its profit.
5. Calculate the profit margin in question 4, to one decimal place.
6. State two characteristics of a competitive market.
7. Explain why profits tend to be lower in a competitive market than in one dominated by a few firms.
8. Define oligopoly and state what interdependence means.
9. A plant has fixed costs of Z50,000 and variable costs of Z4 per unit. Calculate average cost at 10,000 units.
10. State two causes of monopoly power.
11. Explain one way in which competition can harm workers.
12. A ferry fare rises from Z20 to Z25. Calculate the percentage rise.

Answers

1. Number of producers; degree of product differentiation; ease of entry.
2. 18,000 ÷ 120,000 × 100 = 15%.
3. (80 − 68) ÷ 80 × 100 = 15%.
4. (9 − 8.20) × 150 = 0.80 × 150 = Z120.
5. Revenue = 9 × 150 = 1,350. Margin = 120 ÷ 1,350 × 100 = 8.9%.
6. Any two: many producers; similar products; easy entry and exit; buyers can compare prices and switch.
7. High profit attracts new firms, which enter easily; supply rises, price falls and profit shrinks. Where a few firms dominate, entry is hard, so profit can last.
8. A market dominated by a small number of large producers. Interdependence means each firm must predict how rivals will react to its decisions.
9. (50,000 + 4 × 10,000) ÷ 10,000 = 90,000 ÷ 10,000 = Z9.
10. Any two: high start-up costs; economies of scale; patents or licences; brand loyalty; control of supplies; mergers.
11. Firms squeezed by low prices may hold wages down, cut hours or close, so jobs are less secure.
12. (25 − 20) ÷ 20 × 100 = 25%.

Where marks are usually lost

• Writing “a monopoly always charges high prices” instead of “can”, with a reason.
• Describing a structure without using number of producers, differentiation and ease of entry.
• Naming a barrier to entry but not saying how it protects the firm’s profit.
• Dividing by the new value instead of the original in a percentage change.
• Giving a profit figure where the question asks for a percentage margin, or the reverse.
• Treating a large firm among many rivals as a monopoly.
• Saying oligopolists never compete, instead of explaining non-price competition.
• Listing only advantages or only disadvantages when the command word is evaluate.
• Repeating the same point in different words and gaining credit once.

Official syllabus

Source: OxfordAQA, International GCSE Economics (9214) specification, first teaching September 2023, first examined May/June 2025, sections 3.1.5.1 to 3.1.5.3.