Transcript Competition and the Marketplace

COMPETITION AND THE
MARKETPLACE
OBJECTIVES
• Display understanding of different types of markets
• Explain how businesses respond to different market
conditions in order to better compete
• Compare and contrast the impact of differing
market structures on the success of a product or a
service
KEY VOCABULARY
• Antitrust
• Barriers to entry
• Cartel
• Collusion
• Economies of scale
• Externalities
• Geographic
monopoly
• Government
monopoly
• Market power
• Monopolistic
competition
• Monopoly
• Natural monopoly
• Non-price
competition
KEY VOCABULARY
• Oligopoly
• Perfect competition
• Price elasticity
• Price fixing
• Price maker
• Price taker
• Product
differentiation
• Technological
monopoly
HOMEWORK PASS MARKETPLACE
• Pass out NAF bucks
• Homework due tomorrow
• A two-page research paper on the effect of market
competition on the pricing of avocados
• A five-minute oral presentation on market systems
throughout the developing world
• However, I can be bought
• Homework passes are 10 bucks a piece
HOMEWORK PASS MARKETPLACE
• 4 sellers with 18 passes each
• Seller’s goal is to make as much money as possible
• Buyers still with 20 bucks
• Goal is to pay the least
• Before each round ask each seller to secretly write
his or her selling price on a sheet of paper
• The sellers reveal their prices simultaneously
• Buyers can choose to buy or wait until the next
round
• When the third round is over, have the sellers tally
up their NAF Bucks and report back the results
HOMEWORK PASS MARKETPLACE
• Work in pairs to answer the following questions.
• Turn into drop box
• Was the price for the passes higher or lower when
the teacher was selling them? Why?
• When the students sold passes, did the seller with
the highest prices make the most money? Why or
why not?
• Did prices tend to go up or down during the three
rounds of student sales? Why?
ASSIGNMENT
• 1. Explain and illustrate ways in which large-scale
business can be beneficial to the consumer.
• 2. Explain and illustrate ways in which large-scale
business can harm the consumer.
• 3. Describe some of the problems sometimes created by
concentration of business.
• 4. Why do expanding firms often combine with other
firms?
• 5. It has been said that the average Americans of today
accept big labor / big company price leadership,
mergers, etc. as economic facts of life about which they
can do very little. Do you agree?
• 6. Are monopolies and oligopolies a menace to our free
enterprise system? Explain.
HOMEWORK PASS MARKETPLACE
• Competition among the different sellers, combined
with the consumer’s desire to buy at the lowest
price possible, helps to keep in check price
GUIDE TO FORMS OF THE MARKET
• Four major types of markets (also called market
structures) in a market economy: perfect
competition, monopolistic competition, oligopoly,
and monopoly.
• Which of these market structures most closely resemble the
homework pass situation when I was selling?
• What about when you were selling?
• Download: Learning Guide- Market Structures
• Download: Worksheet- Market Structures Defining
Format
• Work in pairs, turn into drop box
INTRODUCTORY MEMO
• You will be forming consulting teams that are all
vying for a contract with a major avocado grower
and distributor
• How can we, as consultants in a competitive
economy, best help our potential client respond to
the opportunities and threats in the marketplace?
INTRODUCTORY MEMO
• Download: Memo- Elevator Pitch
• Your first task is to prepare a short “elevator pitch” that you
can use when they meet the CEO at the upcoming
National Avocado Grower’s Conference in Orlando, Florida
• You will have about two minutes to informally talk with
Armina J. Pitts, the CEO of the Awesome Avocado, and
impress her with your understanding of the “economics
behind the prices, costs, and profits of Awesome Avocados
over the past two years,” and your ability to “predict
revenue and profit for the next year.”
DEVELOP INITIAL “KNOW, NEED TO
KNOW” LIST
• How can we, as potential consultants to an
avocado production company, understand the
economics behind their prices, costs, and profits
over the past two years, and predict revenue and
profit for the next year?
• Download: Worksheet- Know, Need to Know
• Fill in the first column for discussion
• Fill in second column
ANALYZE PRODUCTION TABLES
• Download: Chart Avocado Sales Data
• How does the quantity of avocados sold vary with
price?
• How did the demand for avocados change
between 2008 and 2009?
• How did the change in demand between 2008 and
2009 affect profit?
DEMAND AND PRICING
• Presentation
PREPARING THE ELEVATOR PITCH
• “Elevator pitch”—sometimes the only opportunity to
pitch an idea is during a short elevator ride with a
potential client or funder
• Write a one-page script for a two-minute elevator
pitch that summarizes what the data show about
prices, costs, and profits in the low-calorie avocado
market
• Use the memo and the chart data to draft your pitch
PEER REVIEW
• Present elevator pitch to another group for review
• What did you like?
• What would you improve on?
• What would you do differently?
• Revise pitches and prep for presentation
INTRODUCTION TO PRESENTATION ON
COMPETITION
• Download: Memo- Increased Competition
• Prepare another two-minute presentation for the CEO to
explain why profits have fallen
COMPETITION
• Presentation
PRESENTATION PLANNING
• Download: Guide- Competition Presentation
• presentations must reveal an understanding of the role of
prices and profit in the processes and outcomes of
competitive markets
PRESENTATION TO CEO
• Present your 2 minute presentations
STICKY NOTE REVIEW
• You are the CEOs of a new athletic shoe
manufacturing company trying to break into the
market
• Decide whether or not each market type would be
good or bad for their business, and come up and
place a + on those market types that would be
good for their new business, a – on those that they
think would be challenging, and a ? on those that
might be good or challenging
ENRICHMENT
• Monopoly Research: There have been several high-profile cases
in recent years in which the courts, on the initiative of the federal
(or individual state) government, have acted to block or restrict
monopolistic business practices of certain companies
• The courts also sometimes impose conditions (known as
“remedies”) on what the companies concerned are allowed to
do, so as to restrict or prevent monopolistic business practices in
the future
• Research Microsoft’s antitrust legal battle with the Antitrust
Division of the US Department of Justice
• Focus specifically on the reason(s) behind the federal
government’s decision to go after Microsoft for what, in the
Antitrust Division’s view, was anti-competitive corporate behavior
(especially the inclusion of the Internet Explorer web browser as
part of the pre-loaded software applications that came on the
majority of PC computers)
ENRICHMENT
• Write a report addressing whether or not Microsoft
was (is) a monopoly, and whether or not the US
government’s action was justified in relation to its
declared objective of bringing about a more
competitive market structure in the market for
Internet browsers
• Ask students to take a poll of 50 school peers to see
which browser they use when surfing the web, and
include these findings in their analysis of the
government decision to go after Microsoft on this
issue.
CROSS-CURRICULAR INTEGRATION
• Science (Chemistry/Biology): Research and write a
report assessing the granting of monopolies
(patents) for a period of time to manufacturers of
pharmaceuticals (prescription drugs), and whether
or not this practice serves the greater public good.
• Look into the claims that pharmaceutical
companies make about the necessity of patents
(for example, to make research and
development—R&D—more profitable); and their
actions when patents on blockbuster drugs, the
industry’s “best sellers,” expire.