An explanation of the characteristics which determine how firms behave

1. CHARACTERISTICS OF
MARKET STRUCTURES
Prepared by Sandrea Butcher

2. • Recall that market structure refers to the characteristics that
determine how the firms in an industry behave.
• These characteristics include:
• Number of firms in an industry
• Type of product
• Control over price
• Freedom of entry and exit

3. NUMBER OF FIRMS IN AN INDUSTRY
• This can range from a large number of
firms, to a few, or even one firm.
I’ll just get rid
of the
competition!

4. TYPE OF PRODUCT
• Products can either be standardized or
differentiated.
• With a standardized (or homogeneous) product
there is no variety.

5. • Differentiated products have differences which are
physical or perceived.
• At the supermarket you have many different brands of
toothpaste selling as follows:
• Whitening
• Tartar control
• Sensitive teeth
• Baking soda
• Anti-gingivitis
• Natural
• Children

6. CONTROL OVER PRICE
• Firms have varying control over price.
• Some accept the price set by the market,
because if they attempt to increase the
price, consumers will shop elsewhere.
These are too
expensive. I will
try further up
the street.

7. • Other firms have some control over price
because the product is different to others on the
market.

8. FREEDOM OF ENTRY AND EXIT
• Some industries may have heavy barriers to entry making them less competitive
while other industries may have little to no barriers to entry.

9. • Barriers include:
• Control of raw materials – If you do not
own a quarry you cannot provide
building sand.
• Licenses – Governments issues licenses
to operate television stations in the
Caribbean
Walkers Sand Quarry, Barbados

10. • High set up costs – Due to the nature of some
business operations, heavy equipment is
required and high set up costs

11. • Some industries have weak barriers to
entry.
• This is why there are so many firms
operating.