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4 Cards in this Set
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- Back
- 3rd side (hint)
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Market Structures 1 The spectrum of competition ranging from perfect competition to monopoly |
Market Structures - organisational/other characteristics of the market Spectrum covers range of market structures between perfect competition & monopoly Perfect Competition - large no. of buyers/sellers with perfect market info, able to buy/sell as they wish at the market price, homogeneous product, no barriers to entry/exit in long run (price taker) Monopolistic competition- firms have many competitors but each one sells a slightly different product Oligopoly - a few mutually independent firms, each needing to note their rivals’ reactions when deciding its own market strategy Duopoly- when two suppliers dominate a market Monopoly - a firm produces 100% of market output (price maker) |
Range of competition |
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Market Structures 2.1 Factors such as the number of firms, the degree of product differentiation and ease of entry are used to distinguish between different market structures |
The number of firms in a market, perfectly competitive = many buyers/sellers. Monopoly = one seller In reality markets are imperfectly competitive, it is impossible for markets to simultaneously meet all the conditions of perfect competition. Pure monopoly does exist, but it is more likely that a market is simply dominated by one firm. Oligopoly - A few larger firms that coexist with with smaller firms Concentration ratios are used to define oligopoly in terms of market structure. Interdependence among firms that make up the market is a main characteristic used to define oligopoly in terms of market behaviour |
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Market Structures 2.2 Factors such as the number of firms, the degree of product differentiation and ease of entry are used to distinguish between different market structures |
Natural barriers from industry e.g. economies of scale (large firms can produce lower on LRAC curve). Indivisibilities (technical economies) stop certain goods not produced in a firm below a certain size. High R&D costs, sunk costs Artificial barriers from firms. Advertising, patenting, limit/predatory pricing, first mover (established customer base), product differentiation |
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Market Structures 2.3 Factors such as the number of firms, the degree of product differentiation and ease of entry are used to distinguish between different market structures |
Limit pricing - lower prices to be unprofitable to deter new entrants. Sacrifice SR for LR (profit) Predatory pricing - prices below average costs to drive new firms out of business. Product differentiation - marketing of generally similar products with minor variations or marketing of wide product range. Some compete with each others and others aim to attract different market segments |
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