Syllabus: AQA - AS and A Level Economics
Module: 3.1.4 Competitive and Concentrated Markets
Lesson: 3.1.4.5 The Competitive Market Process

Introduction

This article supports delivery of AQA AS and A Level Economics, Section 3.1.4.5: The Competitive Market Process. Part of the broader module on Competitive and Concentrated Markets, this topic equips students to explore how markets evolve over time, how firms respond to competitive pressures, and how dynamic efficiency plays out in the real world. It’s a bridge between abstract theory and real commercial behaviour — perfect territory for making Economics relevant and active.

For teachers balancing exam preparation with student engagement, this section offers a chance to combine model-based understanding with practical examples. It also presents a timely way to explore recent market entries, disruptive innovation, and pricing behaviour — all underpinned by core syllabus content.

Key Concepts

Students should be able to:

• Understand how competition drives efficiency and innovation in markets.

• Analyse how firms behave in competitive environments versus more concentrated ones.

• Explain how new firms can enter a market and challenge incumbents.

• Apply economic models (especially supply and demand) to illustrate short-run and long-run market behaviour.

• Recognise the importance of profits as signals and incentives in dynamic markets.

• Discuss the barriers to entry and how they affect the long-term nature of competition.

• Evaluate the extent to which markets are truly competitive in practice.

Linking these to broader curriculum themes, students will also revisit ideas from earlier sections such as market structures, costs and revenues, and the role of the price mechanism.

Real-World Relevance

This topic comes alive when students are encouraged to explore real businesses in real markets. Consider these recent examples:

• Streaming Services: The rise of Disney+, Apple TV and others challenging Netflix. Students can analyse entry strategies, pricing tactics and how established players react.

• Supermarkets: The UK grocery sector continues to be shaped by Aldi and Lidl’s expansion, putting pressure on the Big Four. A great case for cost-efficiency and non-price competition.

• Ride-hailing Apps: Uber’s initial disruption of the private hire market, followed by legal challenges and market saturation, provides a rich context for discussing both competition and regulation.

These examples make abstract economic models tangible and encourage students to think critically about the difference between textbook competition and market realities.

How It’s Assessed

In AQA Economics, students are assessed via data response and essay questions, with command words like explain, analyse, and evaluate commonly used.

Expect questions that:

• Present a market scenario (e.g. entry of a new firm) and ask students to analyse the effects on prices, outputs and profits.

• Require application of diagrams (such as supply and demand curves) to illustrate competitive responses.

• Invite students to discuss the efficiency of competitive markets versus monopolistic ones, drawing on real or hypothetical data.

• Ask for evaluations of how realistic assumptions of the competitive model are when applied to real industries.

To do well, students must not just understand the models, but use them analytically and critically.

Enterprise Skills Integration

This section is a perfect fit for developing active skills such as:

• Decision-making: Students can explore how firms make strategic choices in dynamic environments.

• Problem-solving: Analysing case studies of disruption or competitive behaviour builds students’ ability to break down complex economic phenomena.

• Analytical thinking: Applying supply and demand models to changing market conditions is key here.

Tools such as Enterprise Skills’ Business Simulations are ideal for this module. Students take on the role of decision-makers in fictional firms, reacting to market conditions, choosing pricing strategies, and competing for market share — a practical way to embed the competitive market process through experience.

Careers Links

This topic links directly to the Gatsby Benchmarks, especially:

• Benchmark 4: Linking curriculum learning to careers — especially in sectors like retail, tech, consultancy, and finance.

• Benchmark 5 & 6: Real encounters with the business world can be delivered through simulations or guest speakers.

Relevant careers include:

• Market Analyst

• Business Development Executive

• Entrepreneur

• Product Manager

• Policy Adviser (Competition and Markets Authority)

Students start to see Economics not just as a subject, but as a lens into the behaviour of firms and markets they interact with every day.

Teaching Notes

Time-saving ideas for teachers include:

• Use recent business news articles as case study starters. Students can work in pairs to identify shifts in market structure or competitive behaviour.

• Set up a mock market-entry challenge: students role-play as a new firm trying to disrupt an established market.

• Use demand and supply diagrams not just for static analysis, but to illustrate firm entry, pricing wars, or long-run adjustment.

• Link to Enterprise Skills’ Business Simulations as a plug-and-play activity that reinforces the mechanics of market response and competition without adding to your workload.

Common pitfalls:

• Students often assume “competitive” means “perfect competition”. Clarify the distinction between theoretical models and real-world competition.

• Diagram use can be weak — reinforce step-by-step construction and annotation.

• Evaluations can be too generic. Push students to explore specific conditions under which markets are likely or unlikely to behave competitively.

Extension activities:

• Compare two markets — one competitive, one concentrated — and analyse outcomes for consumers.

• Explore how technology changes barriers to entry (e.g. e-commerce vs traditional retail).

• Invite students to propose regulatory responses to emerging market structures (e.g. big tech).