Students will learn about competition in the market place. They will understand that competition takes place when there are many buyers and sellers of similar products. They will discuss how competition among sellers results in lower costs and prices, higher product quality, and better customer service.


Choice, Competition, Consumers, Decision Making, Goods, Incentive, Markets, Price, Services


  • Understand that competition takes place when there are many buyers and sellers of similar products.
  • Identify competing businesses in their community.
  • Understand that competition among sellers results in lower prices, higher product quality, and better customer service.
  • Explain how the opening of a second pizza shop in a small community affects prices, profits, service, and quality.


Prior to this lesson, the students should be familiar with the following concepts: business, goods and services, economic incentives, and competition.



  • Got Competition?: This article discusses competition. Go to "Search" at the top of the page and type in "Got Competition". Click on the first link provided.
  • Business Competitors Worksheet: Students will fill out this worksheet and identify some competing businesses in their community.
  • Pizza! Activity: This is an interactive activity that will test students knowledge of competition for businesses.
    Pizza! Activity


Businesses & Customers


What is competition in the marketplace?


Student Worksheet: Part 1
Business Competitors in Your Community

  • Can you name four businesses in your community?
  • Can you name a competitor for each business?

Student Worksheet: Part 2
How Do Businesses Compete?

Lowering Prices

Better Products

Better Customer Service

Economic Incentives

Businesses advertise by putting signs up, having TV and radio commercials, and running newspaper ads telling customers about their products. Advertising is used to say how wonderful the products are, to tell about any incentives, sales, lower prices, and to tell customers where the business is located. Advertising is another way in which businesses try to get customers to choose them.

Let's Review the Ways Businesses Can Compete

  • Lower prices
  • Better products
  • Better customer service
  • Incentives: freebies, coupons, sales, and special deals
  • Advertise to say how wonderful their products are.

How Does Competition Affect the Customer?


Activity: Smalltown's Pizza!pizza


  1. How will this affect Tony's pizzeria?
    [Competition from the new pizza restaurant will likely have a negative affect on Tony's business.]
  2. How will this affect pizza lovers in Smalltown?
    [Pizza lovers will have a second option for Pizza in Smalltown.]
  3. What will happen to pizza prices?
    [Pizza prices will fall as the supply of pizza in Smalltown increases.]
  4. How will the two shops compete?
    [The two shops will compete with each other through a process of trial and error, each will try to provide the kind of pizza which consumers want in order to gain their business. ]

Click here to play the Pizza! Activity


Class Discussion (make sure the students have their printed worksheets and Pizza! charts with them).
Think About It and answer the following questions:


  1. What does competition in the marketplace mean? [Businesses that compete for the same customers, sell the same or similar items.]
  2. How do businesses compete with each other? [They may lower their prices, advertise, offer incentives, make a better product, have better customer service.]
  3. Does competition help the consumer? How? [Yes. Competition causes businesses to offer incentives and to attempt to earn their business; customers can get a better selection, lower prices, better service, better products.]
  4. Is there ever a time when competition does not help the consumer? When? How? [Yes. Too much competition could cause a price war, leading to a decrease in the quality of items or customer service. Students may also think of other negative effects.]
  5. What are the possible effects of the second pizza shop opening? [Discuss answers from the flash activity. Have the students share ideas they came up with for having Mo compete with Tony's Pizzeria. Examples might include: prices go down, greater selection in pizza toppings, new items like stuffed crust pizzas, incentives like free soda or free T-shirts, pizza eating contests, wider variety of pizzas offered, better service (like delivery or nicer restaurants), or quicker service. Students may also think of other possibilities.]
  6. What do you predict will happen if a third or fourth pizza shop opens in Smalltown? [At first, pizza shops might offer better products, prices, or incentives, but if a big price war occurs, prices go down, quality suffers, or not enough customers shop to keep that many shops open, so some businesses may shut down.]


Use the students' Pizza! charts, their worksheets, and their participation in the class discussion to determine whether they can explain how businesses compete with each other and how price, quality, and customer service are affected by competition. Students should have been able to come up with some realistic ways that businesses could compete and still stay in business. If the students suggest exaggerated methods, such as giving away pizza, selling it for a nickel, hot air balloon advertising, or other overly expensive or unrealistic way to compete, ask them whether the return on this huge expense could keep them in business. Can bringing in a few more pizza customers pay for the huge expense of some wild method of competing?

Businesses have to balance the need to compete with the ability to stay open and pay for materials, rent, workers--and still make money for the owners. The costs of competing have to make sense compared to what the expected result will be. You don't give away all free pizza just so more people choose your business, because soon you won't have a business. You don't take out expensive national advertising to promote a small local business. Encourage the students to come up with realistic, reasonable methods of competing in a small, local market. Outrageous suggestions, however, might prompt you to pose the question, when would it be reasonable to use outrageous or expensive competing methods? In what type of business? In which markets?