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PROFIT SIGNALLING MECHANISM

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A-level ECONOMICS AND BUSINESS STUDIES Mind Map on PROFIT SIGNALLING MECHANISM, created by julierubio0216 on 02/04/2014.
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Mind Map by julierubio0216, updated more than 1 year ago
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Created by julierubio0216 about 10 years ago
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PROFIT SIGNALLING MECHANISM
  1. HIGN PROFITS ARE MADE IN A MARKET
    1. WHICH MEANS DEMAND FOR P AND S ARE NOT SATISFIED
      1. RESOURCES CAN BE ALLOCATED INTO THE PROFITABLE MARKET
        1. COMPETITION WILL INCREASE IN THIS MARKET
          1. SUPPLY INCREASES
            1. PRICE DECREASES
      2. HIGH PRICE CAN BE CHARGED
      3. LOW COMPETITION
        1. HIGH PROFTS
          1. LOWER CONSUMER CHOICE
            1. CONSUMERS UNSATISFIED(DEMAND RISES)
              1. RESOURCES OF A BUSINESS CAN BE REALLOCATED IN THIS MARKET
                1. HIGH PRICE CAN BE CHARGED
          2. MONOPOLY POWER
            1. SUPERNORMAL PROFITS
              1. HIGH BARRIERS TO ENTRY
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