Loading presentation...

Present Remotely

Send the link below via email or IM


Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.


Market Structure

Mr. Kim's Global Economics

Daniel Kim

on 17 October 2017

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Market Structure

Essential Question
Mr. Kim
Global Economics

Market Structure
Now if we remember our previous unit, we categorized businesses by the
number of owners
Monopoly, Oligopoly, and Monopolistic Competition
How are
and the
profit motive
To answer this question we need to know some basic vocabulary
Competition forces entrepreneurs to keep
prices low enough to attract customers.
Rivalry between entrepreneurs of similar products
to win more business by offering lower prices or higher quality.
But prices must remain high enough to ensure
Competition also forces companies to be
. Companies are constantly looking for ways to
improve their products to beat
out the competition.
What is the main reason entrepreneurs
start businesses
Why would you?
But as the ancient and Sapient philosopher,
Notorious B.I.G.
once said...
"Mo money, Mo Problems"
Last but not least, competition gives us consumers
Sole Proprietors
Go Partnerships!
Fast forward to now and we'll learn that businesses are also categorized by Market Structure, or
the amount of competition they face
There are Four basic market structures:
Monopolistic Competition
We're first going to focus on this one!
Perfect Competition
Most Competition
Least Competition
Perfect Competition is a market situation where there are
buyers and sellers, and
no single buyer or seller can affect the price
For P.C. to exist, five conditions must be met:
Large Market
Identical Products
Easy Entry and Exit from the market
Easily Obtainable Information
Independence. Buyers and sellers do not work together to
control the price
When these conditions are met,
supply and demand
- not individual sellers or buyers,
control the price
There are no pure examples of perfectly competitive markets in the U.S. But we can get close with the
agriculture market
No single farmer has any
great influence
on wheat prices. The market price is also known as the
Equilibrium price
, and any farmer who attempts to raise their price will not be able to sell their harvest
The most extreme form of imperfect competition is a
pure monopoly
. In this market a
single seller
controls the supply of the good or service thus determining the price
A monopolist could
raise prices without fear of losing customers
because buyers would have nowhere else to go for that good or service
Question for you:
It sounds like monopolists have it pretty good. Why don't other businesses
join the monopoly market?
There are
Barriers to entry
! These barriers prevent other firms from entering the market
Costs of starting the business
State Laws
Characteristics of a Monopoly: How to spot one!
A Single Seller
one seller
exists for a particular good or service
No Substitutes
There are
no close substitutes
for the good or service that the monopolist sells
Barriers to Entry
Other firms are kept from entering the market through
obstacles to competition
Almost Complete Control of Market Price
By controlling the
available supply
, they control the market price.
Monopolies can also be categorized into
four categories
depending on why the monopolist exists
Natural Monopolies
: When the government grants exclusive rights to companies that provide services like
transportation, utilities, or military
Geographic Monopolies
A small county store in a rural setting. The
market setting
and the
potential for profits
are so small that other firms choose not to enter the market
If you invent something, you can have a
Technological monopoly
over your invention. A government
gives you the exclusive rights to make, rent, or sell your invention for around
20 years
King C. Gillette
Rudolf Diesel
Similarly, a copyright

protects people's
song lyrics
, and other
creative works
for the rest of the life of the author plus an additional 70 years
Copyright battle between Ray Charles' children and Warner Music
Finally we have
Government Monopolies.
These monopolies are very similar to Natural Monopolies, but they are held by the Government itself
Oligopolistic Markets can be defined as an industry
by a
firms that have some control over price.
Oligopolies are
not considered harmful
to consumers as much as monopolies are. While prices are not quite as low as they would be in a perfectly competitive market, Oligopoly prices are
generally stable
Market Prices for Consumers
Perfect Competition
Monopolistic Competition
Like Monopolies, there are
Five characteristics
of an Oligopoly.
The Market is Dominated by a
few sellers
. These large firms are usually responsible for
percent of the market
Just like Monopolies, there are
barriers to entry!
Ever thought of starting your own cell-phone company? Good luck with that...
Markets will
provide identical
or slightly different products
Non-Price Competition
Advertisements will focus on minor differences in goods or services
instead of the price
: Any move one firm makes will cause a reaction from the other firms
Monopolistic Competition
Of the Four Market Structures,
Monopolistic Competition
is the most
structure in the United States
This market is characterized by a
large number of sellers
who offer similar but slightly different products or services. We call this
We've previously noted
fast-food restaurant chains
as obvious examples of Monopolistically Competitive Markets. What else can we think of?
One thing that can help us understand Monopolistic Competition is that it is very similar to
. The major difference being the number of
sellers or firms
in the market.
Monopolies and Oligopolies have the most
amount of control
over the price of a market for previously discussed reasons.
Monopolies control the price because they are the
only show in town
. Oligopolies control the price through
a large part of the market.
M.C. has a little control of the price through something called
If a firm succeeds in building
customer loyalty
for a product, it can raise prices slightly
without fear of losing
too many customers.
How do firms build customer loyalty?
Enter: Competitive Advertising
Advertisements attempt to
persuade consumers
that their product is superior, and
different from their competitors
Can anyone think of a commercial jingle, or song that convinced them to buy a product?
When advertisements are successful, it allows firms like GAP, Nike, and Best Buy to charge
more for their products
. That's why firms pour millions upon millions of dollars into their advertisements
Some say brand name companies make people
pay more money
just for the name associated with the product.
Others say that the brand names can represent a
guarantee of quality
Can you think of many vegetable/fruit commercials off the top of your head?
Probably not
Very little incentive to advertise with so much competition in a homogeneous market
Full transcript