Ec102 may 03


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  • If you don’t take it, someone will – lugi ka
  • If you don’t take it, someone will – lugi ka
  • Ec102 may 03

    1. 1. MARKET STRUCTURES<br />Ec102 D - May 05, 2011<br />
    2. 2. MARKET STRUCTURES<br />Competitive<br />Perfect – Dating <br />Monopolistic<br />Monopoly – Princess, Superman<br /><ul><li>Monopsony – Prom Date</li></ul>Oligopoly – Exam, Mean Girls<br />
    3. 3. DETERMINANTS OF MARKET STRUCTURES<br />Number of Firms<br />Freedom of entry and exit<br />Nature of the product – homogenous (identical), differentiated<br />Control over supply/output<br />Control over price<br />
    4. 4. MARKETS<br />Group of buyers and sellers<br />Type of market structure influences how a firm behaves:<br />Pricing<br />Supply<br />Barriers to Entry<br />Efficiency<br />Competition<br />
    5. 5. PERFECTLY COMPETITIVE<br />Many buyers and sellers<br />Freedom of entry and exit<br />Nature of the product – homogenous (identical)<br />Control over supply/output – market <br />Control over price – market <br />
    6. 6. MANY BUYERS AND SELLERS<br />Actions of any single buyer or seller has a negligible impact on the market price<br />RESULT: Price takers<br />Since each has negligible impact, each buyer and seller will just take/accept whatever the market price is<br />
    7. 7. MANY BUYERS AND SELLERS<br />Market for Starapples<br />Ave price is P30 per kg<br />If one seller sets its price at P40, buyers will not buy from that seller<br />If s/he sets price at P20, other seller will intervene (kill her, kidding)<br />No choice but to take P30 price<br />
    8. 8. FREEDOM OF ENTRY AND EXIT<br />If someone wants to start a firm, go<br />If someone wants to leave, fine<br />Because it is free, as long as it is profitable, many sellers will enter, many buyers will buy<br />Results to negligible impact of each buyer or seller<br />
    9. 9. HOMOGENOUS PRODUCTS<br />Products are largely the same<br />Since there are many firms with the same product and same price, buyers can easily transfer<br />Since there are many buyers who want the same product, firms can ignore those who won’t take their price<br />
    10. 10. OUTPUT/PRICE<br />Determined by market forces of supply and demand<br />Market demand and market supply in equilibrium<br />Profit Max: P=AR=MR<br />AR=TR/Q<br />
    11. 11. OUTPUT/PRICE<br />P=AR=MR<br />AR=TR/Q<br />If Q increases  TR = PQ <br />OUTPUT effect – More Q, TR increases<br />NO PRICE effect since they are price takers<br />
    13. 13. PERFECTLY COMPETITIVE<br />Boys and girls on campus<br />Same girls/boys<br />If you don’t take it, someone will<br />Mineral Water in SM Malls<br />Movie Tickets in the same mall chain<br />Classes with different profs<br />
    14. 14. MONOPOLY<br />Only 1 firm selling particular g/s<br />Barriers to entry exists: firms cannot enter the market and compete<br />Product has no close substitute<br />Control of price: Monopolist<br />
    15. 15. NO CLOSE SUBSTITUTES<br />Demand tends to be inelastic<br />If buyers do not like the price of the monopolist, they cannot buy it anywhere else<br />Prime example: Meralco and electricity<br />
    16. 16. BARRIERS TO ENTRY<br />Resources: Key resource for prod’n owned by a single firm<br />Gov’t regulation: gov’t gives a single firm exclusive right to produce g/s<br />Prod’n process: Single firm can produce output at a lower cost than can a larger number of producers<br />
    17. 17. BARRIERS TO ENTRY<br />Resources: Key resource for prod’n owned by a single firm<br />Example: Water<br />Rarely happens<br />Resources are owned by many people<br />
    18. 18. BARRIERS TO ENTRY<br />Gov’t regulation: gov’t gives a single firm exclusive right to produce g/s<br />Sometimes political<br />Patent and Copyright – lead to higher prices<br />BUT encourages research and more productivity <br />
    19. 19. MONOPOLY REVENUE<br />
    20. 20. OUTPUT/PRICE<br />MR < P<br />As Q is increased, P must be decreased<br />If Q increases  TR = PQ <br />OUTPUT effect – More Q, TR increases<br />PRICE effect – P falls, TR decreases<br />Profit Max: MC=MR<br />
    21. 21. MONOPOLY<br />Princess<br />Only producer of…princessness<br />Buyers (suitors) have no other option<br />Suar<br />Can do everything<br />No one can compete<br />Meralco<br />
    22. 22. MONOPOLISTIC COMPETITION<br />Many buyers and sellers<br />Freedom of entry and exit<br />Differentiated Products – similar but not identical<br />Example: Low Price Edition books<br />Different Editions<br />Control over supply/output – monopoly<br />
    23. 23. MONOPOLISTIC COMPETITION<br />Downward sloping demand curve<br />Profit Max: MR=MC<br />P>MC<br /> Same as monopoly<br />P=AC<br />Same as Perfectly Competitive<br />
    24. 24. MONOPOLISTIC COMPETITION<br />Differences from Perfectly Competitive<br />Excess Capacity – producing below capacity because if Q is increased, P has to be decreased<br />Mark up over Marginal Cost – P>MC because firm has market power<br />
    25. 25. MONOPOLISTIC COMPETITION<br />Boys and girls on campus<br />Not really perfectly competitive<br />Similarity – same gender<br />But not identical – each unique<br />Each has a monopoly of his/her traits<br />Classes with different profs<br />
    26. 26. OLIGOPOLY<br />Many buyers and FEW sellers<br />High barriers in entry and exit<br />Products may/not be differentiated<br />Price setter<br />Interdependence among firms<br />Cooperation<br />Self-interest<br />
    27. 27. OLIGOPOLY<br />Collusion – an agreement among firms in a market about quantities to produce or prices to change<br />Kim and Gabe last Friday<br />Cartel – group of firms acting in unison<br />Acts as a monopoly<br />
    28. 28. OLIGOPOLY<br />Mean Girls – HIGH barrier to entry<br />Exam – producers have the bargaining chip<br />Oil giants – Petron, Caltex, Shell<br />Cannot collude explicitly<br />But notice that when one increases its price, the rest follow<br />
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    31. 31. ACTIVITY #1<br />2 students same birthday<br />Minus 2 in the Midterm Exam Grade<br />Suspected of cheating<br />If proven – 0 in the Midterm Exam Grade<br />
    32. 32. ACTIVITY #1<br />Options:<br />If one confesses and the other doesn’t<br />The one who confessed will not get any deduction<br />The one who doesn’t will get 0<br />If both confesses<br />Both get only minus 5<br />
    33. 33. THIS WEEK<br />FRIDAY<br />Quiz on Market Structures<br />Price and Output Determination in Mon, MonCom, Oligopoly<br />Market Failures<br />PARTYIN PARTYIN YEAH<br />FUN FUNFUN, LOOKIN’ FORWARD TO THE WEEKEND<br />
    34. 34. DUE ON MONDAY<br />Short paper on the film for Friday<br />1 full page (until bottom)<br />Refer to syllabus for formatting<br />Outline for your video presentation<br />Concept<br />Basic flow<br />
    35. 35. GROUP QUIZ<br />AMPC and the blue book market<br />Market for autoload/e-load<br />Turon market in the Ateneo<br />Grades in Ec102 D class<br />Market of all Ec102 classes in the Ateneo<br />