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Which one of the following best describes the term market power? Select one answer - Edexcel - GCSE Business - Question 3 - 2017 - Paper 1
Question 3
Which one of the following best describes the term market power? Select one answer. A - The combination of product, price, promotion and place B - The influence a... show full transcript
Worked Solution & Example Answer:Which one of the following best describes the term market power? Select one answer - Edexcel - GCSE Business - Question 3 - 2017 - Paper 1
Step 1
Step 2
Explain factors affecting market power
Answer
One factor that affects market power is the 'number of substitutes.' If there are many alternative hamburger vendors nearby, customers can easily switch, reducing Five Guys’ pricing power. This leads to a demand scenario where consumers are not beholden to just one option, thereby influencing Five Guys’ ability to set higher prices.
Step 3
Discuss the implications of market power
Answer
Consequently, if Five Guys maintains a high level of customer satisfaction and brand loyalty, it may reduce the market's sensitivity to substitutes. Therefore, their perceived quality allows them to charge a premium, emphasizing their market power. In summary, market power in Five Guys is substantially affected by factors like customer preferences, competition, and product quality.