Firms and Competition (Empresas y Competencia)
Why do firms compete? (¿Por qué compiten las empresas?)
Firms compete because they want to:
● Get more customers.
● Sell more and become bigger in the market.
● Improve their brand and product quality.
● Make more money (this is their main goal).
How does competition help consumers? (¿Cómo nos beneficia la competencia?)
When firms compete, they:
✔ Use resources more efficiently.
✔ Offer better prices and better quality.
✔ Innovate and improve their services.
Types of Competition (Tipos de Competencia)
Price competition → Firms lower their prices to attract customers. But if they lower them too much,
they lose money.
Non-price competition → Instead of lowering prices, they improve quality, branding, advertising,
and customer service.
The Power of Advertising (El poder de la publicidad)
📢 Advertising helps firms to:
● Make more people want to buy their product.
● Keep loyal customers (so they keep buying from the same brand).
● Charge higher prices than their competitors.
● Sometimes, small firms cannot afford advertising, so big firms dominate.
Pricing Strategies (Estrategias de Precios)
Firms use different strategies depending on the market:
💰 Price Skimming → Setting a high price when there is little competition. (Poner un precio alto
cuando hay poca competencia).
💲 Penetration Pricing → Setting a low price to attract customers. (Poner un precio bajo para atraer
clientes).
🔥 Predatory Pricing → Lowering prices aggressively to eliminate competitors. (Bajar precios
demasiado para sacar a la competencia).
📏 Cost-Plus Pricing → Setting a price based on cost + a fixed profit. (Precio basado en costo +
ganancia).
🚨 Watch out for price wars! (¡Cuidado con las guerras de precios!)
If firms compete by lowering prices too much, they all lose money.
Market Structures (Estructuras del Mercado)
Perfect Competition → Many small firms sell identical products. No firm can set its own price.
Competitive Market → Many firms differentiate their products with branding, quality, and
promotions.
Oligopoly → A few big firms dominate the market. Instead of lowering prices, they compete with
advertising and branding.
Monopoly → One firm controls the market. It can set prices and limit competition.
Why Are Monopolies a Problem? (¿Por qué los monopolios pueden ser un
problema?)
Higher prices.
Fewer choices for consumers.
Lower quality (no competition = no motivation to improve).
Less efficiency.
📢 Are monopolies always bad? (¿Siempre son malos los monopolios?)
Not always! Sometimes, monopolies:
✔ Lower production costs and offer fair prices.
✔ Invest in innovation and new products.
✔ Compete internationally, which keeps them efficient.
Example: Some companies invented amazing products (like jumbo jets or photocopiers) because
they had monopoly profits to invest in research.
Oligopolies and Price Wars (Oligopolios y guerras de precios)
● Oligopolies avoid price wars because they reduce profits.
● Instead, they agree on prices (sometimes illegally).
● They may limit supply to increase prices.
Example: The electricity market in Spain is an oligopoly—five firms control 80% of the market.
Work and Salaries (Trabajo y Salarios)
Why do people work? (¿Por qué trabajamos?)
People work to earn money. But they also care about job security, career growth, and working
conditions.
Wage factors (Factores salariales) → How workers get paid:
● Time rate ⏳ → Paid per hour. (Pago por hora).
● Piece rate 🔧 → Paid per item produced. (Pago por unidad).
● Performance-related pay 💰 → Bonuses or commissions. (Bonos o comisiones).
Non-wage factors (Factores no salariales) → What makes a job attractive:
✔ Job security.
✔ Working hours.
✔ Work environment.
✔ Promotion opportunities.
Example:
● A surgeon earns a high salary, but has stressful, long hours.
● An office assistant has regular hours, but a lower salary.
Specialization at Work (Especialización en el Trabajo)
Most people specialize in one job to be more productive.
✔ Advantages:
● Workers become experts and earn more.
● Work is more efficient.
❌ Disadvantages:
● Dependence on others for goods and services.
● Work can become boring.
● Technology can replace jobs.
The Labor Market (El Mercado Laboral)
📈 If wages (salario) go up: More people want to work, but firms hire fewer workers.
📉 If wages (salario) go down: Fewer people want to work, but firms hire more workers.
What Affects the Demand for Labor? (¿Qué afecta la demanda de trabajadores?)
Firms hire more workers when:
✔ More demand for products.
✔ Workers are more productive.
✔ Machines are expensive, so firms prefer humans.
Firms hire less when:
❌ Less demand for products.
❌ Workers are less productive.
❌ Machines are cheaper than workers.
What Affects the Supply of Labor? (¿Qué afecta la cantidad de trabajadores?)
More workers available when:
✔ Higher wages, better conditions.
✔ More people of working age.
✔ Better education and training.
Fewer workers available when:
❌ Low wages, bad conditions.
❌ Fewer people of working age.
❌ Less education and training.
Why Do Some Jobs Pay More? (¿Por qué algunos trabajos pagan más?)
💰 Some jobs pay more because:
✔ They require high skills.
✔ They are dangerous (firefighters, soldiers).
✔ They have unsociable hours (night shifts).
✔ Workers can relocate easily for better pay.
Minimum Wage: Good or Bad? (Salario mínimo: ¿Bueno o malo?)
Pros:
✔ Helps reduce poverty.
✔ Increases motivation and productivity.
Cons:
❌ Can make labor more expensive for firms.
❌ If too high, businesses may hire fewer workers.
💡 If the minimum wage is too high: Too many people want jobs, but there aren’t enough jobs
available.
💡 If it’s too low: There are more jobs than workers willing to take them.
