Market Structures: An Introduction -...
Transcript of Market Structures: An Introduction -...
Principles of Microeconomics
Market Structures: An Introduction
A market is a set of buyers and sellers, commonly referred to as agents, who through their interaction, both real and potential, determine the price of a good, or a set of goods. (www.policonomics.com)
The concept of a market structure is therefore understood as those
characteristics of a market that influence the behavior and results of the firms working in that market. (www.policonomics.com)
Number of firms
Barriers of Entry/Exit
Product differentiation
Characteristics
1. Perfect competition 2. Monopoly 3. Monopolistic competition 4. Oligopoly
Four Basic Types of Market Structures
Number of firms
Perfect competition
Many large firms and the firms are price takers
COMPETITIVENESS CONTINUUM
More competitive (fewer imperfections)
Perfect Competition
Monopoly
Monopolistic Competition Oligopoly
Less competitive (greater degree of imperfection)
Perfect Competition
Pure Monopoly
COMPETITIVENESS CONTINUUM
Monopolistic Competition Oligopoly
Number of firms
Barriers of Entry/Exit
Product differentiation
Perfect competition
Many large firms and the firms are price takers
Easy entry and exit
Identical Products
Number of firms
Barriers of Entry/Exit
Product differentiation
Monopoly
Just one firm and the firm is a price maker
Entry is not possible
No close substitutes
Number of firms
Barriers of Entry/Exit
Product differentiation
Monopolistic Competition
Large number of small firms
Relative ease of entry and exit
Similar, but not identical goods
Number of firms
Barriers of Entry/Exit
Product differentiation
Oligopoly
Small number of large firms
Significant barriers to entry
Identical or differentiated products
SUMMARY
Characteristics Behavior
Market Structure
Number of Firms
Entry/Exit Condition
Product Type Price Strategy
Promotion Strategy
Perfect Competition
Very Many Easy Standardized Price Taker None
Monopoly One None Only one product
Price Maker Little
Monopolistic Competition
Many Easy Differentiated Price Maker Large Amount
Oligopoly Few Impeded Standardized/Differentiated
Interdependent Little or large amount
Review Quiz
Identify the following as either Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly
1. Oil Industry 2. Restaurants 3. Soft drinks 4. Telecommunications Company 5. Electricity 6. Smartphones 7. Local Water Utilities 8. Retail Stores 9. Landline 10.Toothpaste
Identification
Complete the table below:
Characteristics Behavior
Market Structure
Number of Firms
Entry/Exit Condition
Product Type Price Strategy
Promotion Strategy
Perfect Competition
1. 2. 3. 4. 5.
Monopoly 6. 7. 8. 9. 10
Monopolistic Competition
11. 12. 13. 14. 15.
Oligopoly 16. 17. 18. 19. 20.
RD VELASCO, MM
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Photo Sources
• http://abhinavpmp.com/wp-content/uploads/market-competition-advantages.jpg
• http://www.lingocourse.com/wp-content/uploads/2014/01/16467872-abstract-word-cloud-for-market-structure-with-related-tags-and-terms.jpg
• http://media.economist.com/images/images-magazine/2011/01/15/ld/20110115_ldp004.jpg
• http://www.astbearings.com/assets/images/food-industry1.jpg
• http://www.grantwinstead.com/wp-content/uploads/2014/01/suppliers.jpg
• http://www.clker.com/cliparts/8/f/3/9/11949983831557358698exit.svg.hi.png
• http://www.grocery.com/wp-content/uploads/2013/09/Shopping_cart_with_food_clip_art_2.svg_.png
• Text and definitions are lifted from wires specially www.bized.com