2.1.4 How the digital economy affects markets and firms

What do price comparison sites do?

Allow consumers to compare products and services, reducing information asymmetry.

What is viral marketing?

Marketing where viewers share content, potentially going viral on social media.

What is micromarketing?

Targeted marketing aimed at a small, specific group of consumers.

What is online retailing?

Selling products online via platforms like Amazon, Asos, and eBay.

What is the long tail theory?

Selling a large range of niche products in small quantities online.

How do online markets affect geographical reach?

Firms can sell to a global audience without physical stores.

How does the digital economy affect costs and prices?

Lowers production and distribution costs, improving efficiency.

What is firm creation and destruction in the digital economy?

New opportunities allow firms to grow, while some old firms fail (creative destruction).

How does technological change impact digital markets?

Improves efficiency, lowers costs, creates new products, and may destroy old markets.

How does the digital economy accelerate creative destruction?

Old firms struggle or exit, while innovative firms grow and expand the economy’s productive potential.