1. Discuss using examples from a leisure industry of your choice, the extent to which competition creates efficiency.

1523 Words May 16th, 2014 7 Pages
June 2013
1. Discuss using examples from a leisure industry of your choice, the extent to which competition creates efficiency.
There are many ways in which a firm or leisure industry can be considered to be efficient. First of all they may be productively efficient. This is where they would be operating at their lowest average cost, meaning they are benefiting from all economies of scales and experience no diseconomies of scale. They particularly must avoid any waste of factors of production. Allocative efficiency exists when the firm is operating where Price is equal to Marginal Cost. When a firm or industry is allocatively efficient this means they are producing what society wants and allocating resources to increase both output and
…show more content…
But increased competition is not the only factor; government intervention must also be considered.

In the leisure industry there is always a need for Travel Agents to be allocatively efficient, this is because it is vital that they produce what society wants. If it was the case that certain Travel agents were not providing the holidays that consumers wanted this would simply result in holiday makers going elsewhere. This is especially the case at present because barriers to entry/exit have decreased meaning new firms are entering the market all of the time due to improved communication. This has increased competition mainly due to the internet as many travel agents and comparison websites have set up online to compare the best deals, which increases the power to the consumer as they are no longer required to visit the main four travel agents. This has resulted in a greater need for travel agents to avoid mis-allocation of their resources by decreasing the number of planes and destinations. This is because if they do not allocate their holidays to societies needs their Marginal Cost will increase above their price. Therefore increased competition leads to an increase in the need for firms to allocate resources to what society needs and ensure that they are increasing their quality and output to become allocatively efficient. We have established that increased competition will inevitably result in

More about 1. Discuss using examples from a leisure industry of your choice, the extent to which competition creates efficiency.

Open Document