Pe business organization & market structure student

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Pe business organization & market structure student

  1. 1. Unit #3 (Part 2) Competition & Business Organization<br />PRACTICAL ECONOMICS<br />
  2. 2. Market Structure<br />Market Structure – the organization of a market that is based upon the degree of competition among businesses<br />4 TYPES OF COMPETITION<br />Perfect (Pure) Competition<br />Monopolistic Competition<br />Oligopoly<br />Monopoly<br />
  3. 3. #1 Perfect Competition<br />- A market where a large number of firms produce essentially the same product<br />Five conditions that must be met:<br />1. A large market<br />2. A similar product<br />3. Easy entry and exit<br />4. Easily obtainable information<br />5. Independence<br />**IMPORTANT – These firms have NO CONTROL OVER PRICE!!**<br />
  4. 4. #2 Monopolistic Competition<br />- A market where a large number of firms produce goods that are similar but varied<br /><ul><li>Conditions
  5. 5. 1. Numerous Sellers
  6. 6. 2. Relatively Easy Entry into Market
  7. 7. 3. Differentiated Products – create real or perceived differences
  8. 8. 4. Use of Nonprice Competition
  9. 9. 5. Some control over price!</li></ul>IMPORTANT – *If these competitors can make you buy into their “brand”, they can raise their prices within a narrow range*<br />
  10. 10. REVIEW<br />MOST COMPETITIVE<br />BIGGEST # OF FIRMS<br />MANY FIRMS<br />NO CONTROL OVER PRICE<br />SOME CONTROL OVER PRICE<br />
  11. 11. #3 Oligopoly<br />A market where a few firms produce similar or identical products <br />Conditions<br /> -1. Domination by a Few Sellers<br /> - 2. Barriers to entry<br /> -3. Identical or Slightly Different Products<br /> -4. Nonprice competition<br />-5. Interdependence<br />Collusion (ex. Price Fixing)– BAD for Consumers<br /> Price Wars – GOOD for Consumers<br />**IMPORTANT – Each firm has the ability to cause a change in output, sales, & prices of entire industry!!**<br />
  12. 12. #4 Monopoly<br />- A market where there is a single producer of a product that has no close substitutes<br />Conditions<br /> 1. A single seller<br /> 2. No substitutes<br /> 3. No entry<br /> 4. Almost complete control of market price<br />Are there monopolies in the U.S.?<br />
  13. 13. Types of Monopolies<br />Natural monopoly<br />Market situation where costs are minimized by having a single firm produce the product<br />Geographic monopoly<br />Occurs when a town is too small to support two or more of the same business<br />Technological Monopoly<br />A firm or individual has discovered a new manufacturing technique or has invented something new = monopoly<br />(Gov’t gives patent or copyright)<br />Government Monopoly<br />A business the gov’t owns and operates that involve products that private industry cannot supply<br />
  14. 14. REVIEW<br />MOST COMPETITIVE<br />LEAST COMPETITIVE<br />BIGGEST # OF FIRMS<br />MANY FIRMS<br />A FEW FIRMS<br />ONE FIRM<br />NO CONTROL OVER PRICE<br />SOME CONTROL OVER PRICE<br />A LOT OF CONTROL OVER PRICE<br />TOTAL CONTROL OVER PRICE<br />

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