Transcript Market Structures - Ms. McManamy's Class

Economics Unit 4, Lesson 2
Market Structures
Amount and Degree of Competition
among Firms Competing in the same
Industry
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Industry
• All the sellers of the same or similar
product
• Example: Automobile industry
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Market
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The buyers
The sellers
The product
The price
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Market Structure
• Identifies the amount of competition in
an industry
• If we can identify the amount of
competition in an industry, we’ll be able
to say something about:
• Pricing
• Price competition
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Perfect Competition
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Model does not exist
Infinite number of sellers
Consumers have access to all information.
Sellers have no control over prices.
Identical products
Buyer does not prefer one item over the other
Most competitive
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Imperfect Competition
• Three types of imperfect
competition
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Monopolistic Competition
• All conditions of perfect competition
with product differentiation
• Non-price competition
• Most competitive of imperfect
competition
• Most companies operate here
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Oligopoly
• Few, large firms dominate the market
(70-80% of the market concentration).
• Not as much competition- Firms have
some control over prices.
• Price leadership
• Collusion
• Price fixing
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Monopoly
• One seller
• No competition
• Legal types
– Natural
– Technological – Patent or copyright
– Governmental
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Monopolies
Natural
• It would be inefficient for more than one
seller to operate.
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Monopolies
• Technology
– Patent, copyright
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Monopolies
Governmental
• Government owned and controlled
• Example: US Postal Service
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Monopolies
• Franchises or licenses
– Cable companies
– Radio, TV, cell phones, broadband
• Industrial organizations
– NFL, NBA, etc.
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Perfect
Monopolistic
Competition Competition
Most
Oligopoly
Monopoly
Least
Continuum of Market Structures – Shows degrees of competition
from most competition to least competition.
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Price Discrimination
• Divide consumers into groups.
• Charge different prices to different
sections of consumers.
• Examples?
• Movie theatre
• Senior citizen discounts
• Cleaners
• Airline tickets
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