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Niche, a complex concept with dual elements, refers to the location of a species' feeding, nesting, sheltering, and mating and to its role (function) within that ecosystem location. Competitive exclusion refers to those factors that impede a species' niche activity of surviving and reproducing (feeding, nesting, sheltering, mating).
To elaborate upon niche (niche: specialized location; specialized function), each species has a "fundamental" niche in which its role in the ecosystem, its tolerance limits for conditions of survival (temperature etc) and its survival requirements of feeding, mating etc are optimally fulfilled. Each species seeks the "realization" (realised niche: actual niche) of their ecological niche that is closest to the fulfillment of their fundamental niche.
When more than one species in an ecosystem has the same or similar fundamental niche, their niche requirements overlap. When these overlap to a significant degree, this becomes an impediment to survival for one of the species. This impeding interference of one species in the success of another species is competitive exclusion: both species compete for ecosystem resources and one excludes the other from the niche and ecosystem.
This concept of competitive exclusion is often illustrated by the case of the red squirrel in England. The red squirrel is indigenous while the grey squirrel was introduced and has become an invasive species.
Both red and grey squirrels have the same niche, yet the grey is far more aggressive in demanding and meeting survival and requirements. Over time, the red squirrel populations have been driven to more and more confined and less fundamental niches resulting in the encroaching replacement of the red squirrel populations by the grey squirrel through the process of competitive exclusion: the competitiveness of the grey for the same ecosystem niche resources is progressively excluding the red squirrel.
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