Chapter 7 Market Structure Section 1 Competition and
- Slides: 17
Chapter 7 Market Structure Section 1 Competition and Market Structures
Lesson 1: Competition and Market Structure Essential How Question: do varying market structures impact prices in a market economy?
What Are Markets? A market is where buyers and sellers: meet to exchange goods and services. are affected by some level of competition.
Market Structure Characterized by the degree of competition among business in the same industry Types of Competition: Pure (Perfect) Competition Monopolistic Competition Oligopoly Monopoly
Pure (Perfect) Competition When a large number of buyers and sellers exchange identical products under five conditions 1. There should be a large number of buyers and sellers 2. The products should be identical 3. Buyers and sellers should act independently
Pure (Perfect) Competition (cont) 4. Buyers and sellers should be well- informed 5. Buyers and sellers should be free to enter, conduct, or get out of business
Pure (Perfect) Competition (cont) Under a Pure Competition Supply and demand set the equilibrium price Each firms sets a level of output that will maximize its profits at that price Imperfect Competition Refers to market structures that lack one or more of the five conditions
Monopolistic Competition Meets all conditions of perfect competition except for identical products Use product differentiation Real or imagined differences between competing products in the same industry Use non-price competition Advertising, Sell giveaways, promotional campaigns within a narrow price range to try to raise the price = profit maximization
Examples of Monopolistic Competition Firms sell slightly differentiated products v. Differentiation may be color, packaging, store location, store design, store decorations, delivery, service…. . anything to make it stand out!
With your neighbor… Think about a monopolistically competitive company from which you have made a recent purchase. What are the substitutes’ prices? Why can there be a range of prices? did you purchase the one you did?
Oligopoly A few large businesses dominate an industry When one business makes a move, the others usually follow Ex: a price war…cuts in airline ticket Sometimes results in collusion or price-fixing which is illegal Collusion: formal agreement to set prices Price-Fixing: charge the same
Monopoly One seller of a product that has no close substitutes Natural Monopoly Geographic Monopoly Technological Government Monopoly
Natural Monopoly – an industry in which economies of scale are so important that only one firm can survive. In other words, it is more efficient for there to be one firm in the industry. Example: Gas companies (we wouldn’t want multiple gas lines underground
Geographic Monopoly No other business chooses to compete in that area Ex: small town drugstore
Technological Monopoly Results from new discoveries and inventions. The government grants these monopolies through the issue of patents and copyrights Patents: inventions Copyrights: publish
Government Monopoly Involves products people need that private industry might not adequately provide
Characteristics of Market Structures Market Structure # of Sellers Perfect Competition many identical Low or Price none takers 1 Unique Extremely Price Monopoly Types of Products Monopolistic Competition Many Slightly differentiated Oligopoly Few sellers Identical or slightly differentiated Barriers to Control Entry Over Price high searchers Easy entry Difficult entry Price searchers Price Searchers Examples
- Chapter 7 lesson 1 competition and market structures
- Market structures graphic organizer
- Market segmentation lesson plan
- Chapter 7 section 3 monopolistic competition and oligopoly
- Monopoly vs perfect competition
- Monopoly vs monopolistic competition
- Monopoly vs oligopoly venn diagram
- Competition refers to
- Leader challenger
- Free entry and exit
- Difference between monopolistic competition and oligopoly
- Difference between perfect competition and monopoly market
- Difference between perfect competition and monopoly market
- Pure competition market
- Different market structures
- Factor market perfect competition
- How does deregulation encourage competition in a market
- Example of pure competition