Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

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.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Market Structure

Mr. Kim's Global Economics
by

Daniel Kim

on 7 March 2014

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Market Structure

Essential Question
Mr. Kim
Global Economics

Market Structure
Competition
Now if we remember our previous unit, we categorized businesses by the
number of owners
Monopoly, Oligopoly, and Monopolistic Competition
Monopolies
How are
competition
and the
profit motive
related?
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
profits
.
Competition also forces companies to be
innovative
. 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
choices
.
Business
Sole Proprietors RULE!
Ma
Pa
Go Partnerships!
Corporations
Franchises
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:
Monopoly
Oligopoly
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
numerous
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
Many
Buyers
Sellers
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
Not many
perfectly competitive markets exist
in the U.S. One good example however is 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
Agricultural products are also
identical
in a given market. Beets produced in
Iowa
are for the most part going to resemble beets in
Illinois
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
Copyrights
Costs of starting the business
State Laws
Characteristics of a Monopoly: How to spot one!
A Single Seller
Only
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
patent
gives you the exclusive rights to make, rent, or sell your invention for around
20 years
.
King C. Gillette
Albert
Einstein
Rudolf Diesel
Similarly, a copyright

protects people's
art
,
literature
,
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
Oligopolies
Oligopolistic Markets can be defined as an industry
Dominated
by a
few
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
Oligopolies
Monopolies
Like Monopolies, there are
Five characteristics
of an Oligopoly.
The Market is Dominated by a
few sellers
. These large firms are usually responsible for
70
to
80
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
Interdependence
: Any move one firm makes will cause a reaction from the other firms
Oligopolies
Chain Reaction you say?
Monopolistic Competition
Of the Four Market Structures,
Monopolistic Competition
is the most
common
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
Differentiation
.
We've previously noted
fast-food restaurant chains
as obvious examples of Monopolistically Competitive Markets. What else can we think of?
VS
VS
VS
VS
One thing that can help us understand Monopolistic Competition is that it is very similar to
Oligopolies
. 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
owning
a large part of the market.
M.C. has a little control of the price through something called
Loyalty
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
.
Full transcript