market structure
TRANSCRIPT
MARKET STRUCTURE
By MLJT
2 types: Perfect Competition Imperfect Competition
- number of buyers & sellers - the ability of individual buyers &
sellers to affect prices
- the freedom of firms to enter and leave the industry
- whether the products being sold by different firms are identical/ somewhat different
occurs in an industry when there are MANY SMALL PRODUCERS who are selling IDENTICAL PRODUCT, with EASY ENTRY. It results in lower prices and greater quantity
Perfect Competition
Perfect Competition
Many Buyers Many Sellers Homogeneous
Products Freedom of Entry
& Exit Perfect
Information
Characteristics: Examples:
Exists when individual sellers exercise an amount of control over the price of their output. (it does not necessarily mean that control is absolute because a firm does not have complete discretion over the price at which it sells the good.) Refers to any form of market structure other than perfect competition and would thus include MONOPOLY, MONOPOLISTIC COMPETITION, OLIGOPOLY and MONOPSONY.
IMPERFECT COMPETITION
MONOPOLY
Example:
Only ONE (1) seller of a good/ service
(note: because seller is large
relative to the market, the action of the seller affects the market price.)
Barriers to Entry- Factors that prevent the entry of new firms to the market.
BARRIERS TO ENTRY: Legal Restrictions
Patents Exclusive
Ownership of a Key Resource or Input
The Need for a Large Investment
Gov’t gives a license to only a single company provider
Gov’t gives exclusive right to produce the products
The need for a large investment discourages entry into the market
Explanation:
OLIGOPOLY Few sellers ( note: because Each seller is large relative to the
market, the action of one seller affects the market price.)
Price is determined by the actions taken by all sellers.
ex. Mobile communication CARTEL- A group of sellers of a product
who have joined together and coordinate their actions
MONOPOLISTIC COMPETITION
Many firms sell products that are relatively close substitutes that are not completely homogenous
Basically perfect competition plus product differentiation
Products are differentiated by quality, packaging & supplementary services offered
Many sellers Firms sell products
that are similar but not identical
Firms are free to enter & exit the industry
Perfect information
Characteristics:
MONOPSONY A monopsony ( mono (one) +
Greek opsonein (buy provisions) is a market situation in which there is only ONE BUYER.
Ex. Tobacco grower
Young Economists
FOR LISTENING……