SlideShare a Scribd company logo
Presented by
Martin, Otundo Richard---HD417-C005-0151/15
Kathata, Patrick Meeme---HD417-C005-2983/15
Kazungu Johnson ---HD417 – C005 - 0115/2015
PhD 2015
COURSE LECTURER: Dr. Sakwa
General Objective:
The focus of this lecture is the four market structures. Students will
learn the characteristics of pure competition, pure monopoly,
monopolistic competition, and oligopoly. Using the cost schedule
from the previous lecture, the idea of profit maximization is
explored.
SPECIFIC OBJECTIVES: To,
1. Identify various determinants of various
market structures.
2. Be able to categorize the various models of
market structure.
3. Describe the assumptions of these market
structures.
4. Explain the relevance of these market
structures.
Market Structures Definition
 Market structure is defined by economists as the characteristics of the
market.
 It can be organizational characteristics or competitive characteristics or
any other features that can best describe a goods and services market.
 The major characteristics that economist have focused on in describing
the market structures are the nature of competition and the mode of
pricing in that market.
 Market structures can also be described as the number of firms in the
market that produce identical goods and services.
 The market structure has great influence on the behavior of individuals
firms in the market.
Features of market structure
 The number of firm operating in a market; It will cover both the local and
foreign markets.
 The concentration ratio of company; this will show the market share held
by the large companies.
 The amount and nature of costs in the market; It will show how the
different costs affect the contestability in the market. It will include the
economies of scale and the presence of sunk costs.
 The degree of vertical integration; Vertical integration is the process of
combining the different stages of production and distribution to be
managed by a single enterprise.
 The levels of product differentiation
 The market churn or the customer’s turnover; this will give the number of
consumer that are willing to change their consumers over a specific period
of time when there are market changes. The market rate of market churn
is an indicator of the level of brand loyalty and influence of marketing and
advertising on customer’s choice.
The Four Major Market Structures
Monopoly: A monopoly exists when one company and one only provides services in
a particular industry, or one company dominates and consumers cannot substitute
anything that comes close. Today, very few industries are monopolies. Utility
companies such as water companies or electric companies may be considered
monopolies. Consumers can't exactly substitute something else for electricity from the
local provider, unless they switch to firewood and candles!
Oligopoly: An oligopoly consists of only a handful of companies selling similar
products. Consumers can substitute products, but only one company's offerings for
another. An example would be the three big American car companies of today: Ford,
GM and Chrysler.
Monopolistic Competition: In monopolistic competition, many sellers sell different
products. It's very similar to competition, below, with the exception that the products
themselves are a bit different from one another, so consumers look for those
differences rather than price differences.
Competition: In markets with perfect competition, there are no barriers to entry, and
many offering different goods. Consumers often shop on price differences alone. Wal
Mart may be viewed as a purely competitive company within the grocery industry for
its super centers that offer lower prices than competing grocery chains.
Major Factors which Determine the Market Structure of an Industry
1. Number of Buyers and Sellers:
Number of buyers and sellers of a commodity in the market indicates the
influence exercised by them on the price of the commodity. In case of large
number of buyers and sellers, an individual buyer or seller is not in the position
to influence the price of the commodity. However, if there is a single seller of a
commodity, then such a seller exercises great control over the price.
2. Nature of the Commodity:
If the commodity is of homogeneous nature, i.e. identical in all respects, then it
is sold at a uniform price. However, if the commodity is of differentiated nature
(like different brands of toothpaste), then it may be sold at different prices.
Again, if the commodity has no close substitutes (like Railways), then the seller
can charge higher price from the buyers.
3. Knowledge of Market Conditions:
If buyers and sellers have perfect knowledge about the
market conditions, then a uniform price prevails in the
market. However, in case of imperfect knowledge,
sellers are in a position to charge different prices.
4. Mobility of Goods and Factors of Production:
When the factors of production can move freely from
one place to another, then a uniform price prevails in
the market. However, in case of immobility of goods
and factors, different prices may prevail in the market.
5. Freedom of Movement of Firms:
If there is freedom of entry and exit of firms, then price will be stable in the
market. However, if there are restrictions on entry of new firms and exit of
old firms, then a firm can influence the price as it has no fear of
competition from other or new firms.
MODELS OF MARKET STRUCTURES
i. Monopolistic competition, a type of imperfect competition such that many
producers sell products or services that are differentiated from one
another (e.g. by branding or quality) and hence are not perfect
substitutes. In monopolistic competition, a firm takes the prices charged
by its rivals as given and ignores the impact of its own prices on the prices
of other firms
ii. Oligopoly, in which a market is run by a small number of firms that
together control the majority of the market share.
i. Duopoly, a special case of an oligopoly with two firms.
iii. Monopsony, when there is only a single buyer in a market.
iv. Oligopsony, a market where many sellers can be present but meet only a
few buyers.
v. Monopoly, where there is only one provider of a product or service.
i. Natural monopoly, a monopoly in which economies of scale cause
efficiency to increase continuously with the size of the firm. A firm is a
natural monopoly if it is able to serve the entire market demand at a
lower cost than any combination of two or more smaller, more
specialized firms.
vi. Perfect competition, a theoretical market structure that features
no barriers to entry, an unlimited number of producers and consumers,
and a perfectly elastic demand curve.(N/B: This Done in Above)
What are the main assumptions for a perfectly competitive market?
• Many sellers in the market - each of whom produce a low percentage of
market output and cannot influence the prevailing market price – each firm
in this market is a price taker - i.e. it has to take the market price
• Many individual buyers - none has any control over the market price
• Perfect freedom of entry and exit from the industry. Firms face no sunk
costs and entry and exit from the market is feasible in the long run. This
assumption means that all firms in a perfectly competitive market make
normal profits in the long run
• Homogeneous products are supplied to the markets that are perfect
substitutes. This leads to each firms being “price takers" with a perfectly
elastic demand curve for their product
• Perfect knowledge – consumers have all readily available information
about prices and products from competing suppliers and can access this
at zero cost – in other words, there are few transactions costs involved in
searching for the required information about prices. Likewise sellers have
perfect knowledge about their competitors
• Perfectly mobile factors of production – land, labour and capital can be
switched in response to changing market conditions, prices and
incentives. We assume that transport costs are insignificant
• No externalities arising from production and/or consumption
Model Assumptions: Monopolistic Competition
.
 Many, many firms produce in a monopolistically competitive industry. This
assumption is similar to that found in a model of perfect competition.
 Each firm produces a product that is differentiated (i.e., different in character)
from all other products produced by the other firms in the industry. Thus one firm
might produce a red toothpaste with a spearmint taste, and another might
produce a white toothpaste with a wintergreen taste. This assumption is similar to
a monopoly market that produces a unique (or highly differentiated) product.
 The differentiated products are imperfectly substitutable in consumption. This
means that if the price of one good were to rise, some consumers would switch
their purchases to another product within the industry. From the perspective of a
firm in the industry, it would face a downward-sloping demand curve for its
product, but the position of the demand curve would depend on the
characteristics and prices of the other substitutable products produced by other
firms. This assumption is intermediate between the perfectly competitive
assumption in which goods are perfectly substitutable and the assumption in a
monopoly market in which no substitution is possible.
 There is free entry and exit of firms in response to profits in the
industry. Thus firms making positive economic profits act as a signal to
others to open up similar firms producing similar products. If firms are
losing money (making negative economic profits), then, one by one,
firms will drop out of the industry. Entry or exit affects the aggregate
supply of the product in the market and forces economic profit to zero
for each firm in the industry in the long run. (Note that the long run is
defined as the period of time necessary to drive the economic profit to
zero.) This assumption is identical to the free entry and exit assumption
in a perfectly competitive market.
 There are economies of scale in production (internal to the firm). This is
incorporated as a downward-sloping average cost curve. If average costs
fall when firm output increases, it means that the per-unit cost falls with
an increase in the scale of production. Since monopoly markets can arise
when there are large fixed costs in production and since fixed costs
result in declining average costs, the assumption of economies of scale
is similar to a monopoly market.
 Few firms dominate an industry.
 Large proportion of industry's output is
shared by a few firms.
 High barriers to entry may be due to
economics of scale, legal barriers, aggressive
tactics such as advertising or high startup
costs
 Products may be identical or differentiated.
 Firms are interdependent and take careful
notice of each other's actions.
1. Seller Influence on price- Sellers are price
makers
2. Extent of strategic behaviour -Sellers do not
behave strategically.
3. Conditions of Entry -Entry into the market is
completely blocked
4. Buyer Influence on Price-Buyers are price
takers
Many small producers such that no one can
influence price.
Firms are price takers in the market. So many firms
that no one firm can influence price
Homogeneous product
Factor (Resource) mobility
Cont.
.Perfect information - no trademarks,
patents, exclusive knowledge
Market entry and exit
No government influence or
interference
Rationality of all market actors
(maximize utility)
Prices determined by the interaction of
supply & demand
Relevance of Monopoly as Market structure
 Stability of prices in a monopoly market the prices are
most of the times stable. Because there is only one
firm involved in the market that sets the prices if and
when it feels like.
 Source of revenue for the government in form of
taxation from monopoly firms.
 Massive profits due to the absence of competitors
which leads to high number of sales monopoly firms
tend to receive super profits from their operations.
 Monopoly firms offer some services effectively and
efficiently.
 Oligopoly refers to an industry dominated by
a small number of sellers with market power.
 They have the ability to limit or discount
competition, and artificially earn excess
profits.
 U. S. cell phone providers are often cited as a
clear example of oligopoly, as the major
providers effectively control the market.
 They set market prices for their goods or
services.
 In Kenya Safaricom and other telecommunications almost
controls the rates of communication within the
telecommunication industry.
 Airline like KQ tends to look like it sets the base of business in
the country and many more.
 Cellphone companies
 Large Banks(AfDB, Equity Bank, Barclays).
 Large Credit Agencies (Visa, Mastercard, Discover)
 They are oligopolies because they have control of and effect the
market in the same way a single company controls a market with
a monopoly - its the same thing end effect - just more than one
company.
 In the real world it is hard to find examples of industries
which fit all the criteria of ‘perfect knowledge’ and ‘perfect
information’. However, some industries are close.
 Foreign exchange markets. Here currency is all
homogeneous. Also traders will have access to many
different buyers and sellers. There will be good
information about relative prices. When buying currency it
is easy to compare prices
 Agricultural markets. In some cases, there are several farmers
selling identical products to the market, and many buyers. At
the market, it is easy to compare prices. Therefore,
agricultural markets often get close to perfect competition.
 Internet related industries. The internet has made many
markets closer to perfect competition because the internet
has made it very easy to compare prices, quickly and
efficiently (perfect information). Also, the internet has made
barriers to entry lower. For example, selling a popular good
on internet through a service like e-bay is close to perfect
competition. It is easy to compare the prices of books and
buy from the cheapest. The internet has enable the price of
many books to fall in price, so that firms selling books on
internet are only making normal profits.
Toothpaste Market:
 When you walk into a departmental store to buy
toothpaste, you will find a number of brands, like
Aquifresh, Colgate, Whitedent, Paradox, etc.
i. On one hand, the market for toothpaste seems to
be full of competition, with thousands of
competing brands and freedom of entry.
ii. On the other hand, its market seems to be
monopolistic, due to uniqueness of each
toothpaste and power to charge different price.
 Such a market for toothpaste is a monopolistic
competitive market.
In summary, In many markets, such as
toothpastes and toilet paper, producers
practice product differentiation by altering the
physical composition of products, using special
packaging, or simply claiming to have superior
products based on brand images or
advertising.
 Krugman, Paul; Obstfeld, Maurice (2008).
International Economics: Theory and Policy.
Addison-Wesley. ISBN 0-321-55398-5.
 Jump up ^ Poiesz, Theo B. C. (2004). "The
Free Market Illusion Psychological Limitations
of Consumer Choice" (PDF). Tijdschrift voor
Economie en Management 49 (2): 309–338.
 Charles I. Jones, (2002)Introduction to
Economic Growth, W.W: Norton & Company
THANK YOU

More Related Content

What's hot

Market structures and price determination
Market structures and price determinationMarket structures and price determination
Market structures and price determination
Harinadh Karimikonda
 
Market Structures
Market StructuresMarket Structures
Market Structures
rahulmathur
 
Market structure in English
Market structure in EnglishMarket structure in English
Market structure in English
Yesica Adicondro
 
Monopolistic competition
Monopolistic competition Monopolistic competition
Monopolistic competition
Bhavikd7
 
Market structure updated
Market structure updatedMarket structure updated
Market structure updated
Sushant Golambade
 
Oligopoly
OligopolyOligopoly
Presentation - Market structure (incomplete)
Presentation - Market structure (incomplete)Presentation - Market structure (incomplete)
Presentation - Market structure (incomplete)
Mohit Rajput
 
Market structure
Market structureMarket structure
Market structure
Yashika Parekh
 
Market structure
Market structureMarket structure
Market structure
Suleyman Ally
 
Types of Market Structure
Types of Market StructureTypes of Market Structure
Types of Market Structure
Raja Adapa
 
Types of markets and their characteristics.
Types of markets and their characteristics.Types of markets and their characteristics.
Types of markets and their characteristics.
Binjal Patel
 
Market Structure
Market StructureMarket Structure
Market Structure
SadiyaKhan41
 
Market structure presentation 2
Market structure presentation 2Market structure presentation 2
Market structure presentation 2
Manet Ramsey
 
Market structure
Market structureMarket structure
Market structure
tikimille
 
Market structure
Market structureMarket structure
Market structure
MacVasquez
 
Market structure
Market structureMarket structure
Market structure
sreekanthskt
 
Forms of market
Forms of marketForms of market
Forms of market
Manish Purani
 
Market Structure
Market Structure Market Structure
Market Structure
GAURAV. H .TANDON
 
Market Structure and Types of Market Structure
Market Structure and Types of Market StructureMarket Structure and Types of Market Structure
Market Structure and Types of Market Structure
Mithilesh Trivedi
 
Market Structure
Market StructureMarket Structure
Market Structure
Villa Santa Maria
 

What's hot (20)

Market structures and price determination
Market structures and price determinationMarket structures and price determination
Market structures and price determination
 
Market Structures
Market StructuresMarket Structures
Market Structures
 
Market structure in English
Market structure in EnglishMarket structure in English
Market structure in English
 
Monopolistic competition
Monopolistic competition Monopolistic competition
Monopolistic competition
 
Market structure updated
Market structure updatedMarket structure updated
Market structure updated
 
Oligopoly
OligopolyOligopoly
Oligopoly
 
Presentation - Market structure (incomplete)
Presentation - Market structure (incomplete)Presentation - Market structure (incomplete)
Presentation - Market structure (incomplete)
 
Market structure
Market structureMarket structure
Market structure
 
Market structure
Market structureMarket structure
Market structure
 
Types of Market Structure
Types of Market StructureTypes of Market Structure
Types of Market Structure
 
Types of markets and their characteristics.
Types of markets and their characteristics.Types of markets and their characteristics.
Types of markets and their characteristics.
 
Market Structure
Market StructureMarket Structure
Market Structure
 
Market structure presentation 2
Market structure presentation 2Market structure presentation 2
Market structure presentation 2
 
Market structure
Market structureMarket structure
Market structure
 
Market structure
Market structureMarket structure
Market structure
 
Market structure
Market structureMarket structure
Market structure
 
Forms of market
Forms of marketForms of market
Forms of market
 
Market Structure
Market Structure Market Structure
Market Structure
 
Market Structure and Types of Market Structure
Market Structure and Types of Market StructureMarket Structure and Types of Market Structure
Market Structure and Types of Market Structure
 
Market Structure
Market StructureMarket Structure
Market Structure
 

Viewers also liked

Rcc structure desing of hotel in hargeisa/ eng galaydh farah ahmed
Rcc structure  desing of hotel in hargeisa/ eng galaydh farah ahmedRcc structure  desing of hotel in hargeisa/ eng galaydh farah ahmed
Rcc structure desing of hotel in hargeisa/ eng galaydh farah ahmed
EngGalaydh Farah Axmed
 
Market stracture
Market stractureMarket stracture
Market stracture
Debashish Paikray
 
Thesis statements
Thesis statementsThesis statements
Thesis statements
lcslidepresentations
 
Bacterial morphology & anatomy
Bacterial morphology & anatomyBacterial morphology & anatomy
Bacterial morphology & anatomy
Kalpesh Zunjarrao
 
Anatomy Of Protozoan Cell
Anatomy Of Protozoan CellAnatomy Of Protozoan Cell
Anatomy Of Protozoan Cell
asdkhalil
 
Islamic art and stained glass
Islamic art and stained glassIslamic art and stained glass
Islamic art and stained glass
ArtfulArtsyAmy
 
Anatomy of protozoans
Anatomy of protozoansAnatomy of protozoans
Anatomy of protozoans
Dr Shifa Ul Haq
 
Jama masjid: An architectural masterpiece
Jama masjid: An architectural masterpieceJama masjid: An architectural masterpiece
Jama masjid: An architectural masterpiece
Ghufran Ahmad Khan
 
Islamic Architecture
Islamic ArchitectureIslamic Architecture
Islamic Architecture
Shahan Saheed
 
Islamic architecture final
Islamic architecture finalIslamic architecture final
Islamic architecture final
Riya Bagchi
 
Presentation Islam
Presentation IslamPresentation Islam
Presentation Islam
AzizjonZ
 
Multi storey building design of 7 storey commercial building
Multi storey building design of 7 storey commercial buildingMulti storey building design of 7 storey commercial building
Multi storey building design of 7 storey commercial building
Razes Dhakal
 
Repairs and rehabilitation 2012
Repairs and rehabilitation 2012Repairs and rehabilitation 2012
Repairs and rehabilitation 2012
Dhaval Jadhav
 
Analysis and design of a multi storey reinforced concrete
Analysis and design of a multi storey reinforced concreteAnalysis and design of a multi storey reinforced concrete
Analysis and design of a multi storey reinforced concrete
Surat Construction PVT LTD
 
Reinforced slab
Reinforced slabReinforced slab
Reinforced slab
Nik M Farid
 
Engineering formula sheet
Engineering formula sheetEngineering formula sheet
Engineering formula sheet
sankalptiwari
 
Basic principles of design for rcc building
Basic principles of design for rcc buildingBasic principles of design for rcc building
Basic principles of design for rcc building
hlksd
 
Design of R.C.C Beam
Design of R.C.C BeamDesign of R.C.C Beam
Design of R.C.C Beam
Ar. Aakansha
 
DESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRO
DESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRODESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRO
DESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRO
Ali Meer
 
Design and analasys of a g+2 residential building
Design and analasys of a g+2 residential building Design and analasys of a g+2 residential building
Design and analasys of a g+2 residential building
=> No nEEd FoH WoRk , Um gOod cOnsUMer oF PArentx MOnEy
 

Viewers also liked (20)

Rcc structure desing of hotel in hargeisa/ eng galaydh farah ahmed
Rcc structure  desing of hotel in hargeisa/ eng galaydh farah ahmedRcc structure  desing of hotel in hargeisa/ eng galaydh farah ahmed
Rcc structure desing of hotel in hargeisa/ eng galaydh farah ahmed
 
Market stracture
Market stractureMarket stracture
Market stracture
 
Thesis statements
Thesis statementsThesis statements
Thesis statements
 
Bacterial morphology & anatomy
Bacterial morphology & anatomyBacterial morphology & anatomy
Bacterial morphology & anatomy
 
Anatomy Of Protozoan Cell
Anatomy Of Protozoan CellAnatomy Of Protozoan Cell
Anatomy Of Protozoan Cell
 
Islamic art and stained glass
Islamic art and stained glassIslamic art and stained glass
Islamic art and stained glass
 
Anatomy of protozoans
Anatomy of protozoansAnatomy of protozoans
Anatomy of protozoans
 
Jama masjid: An architectural masterpiece
Jama masjid: An architectural masterpieceJama masjid: An architectural masterpiece
Jama masjid: An architectural masterpiece
 
Islamic Architecture
Islamic ArchitectureIslamic Architecture
Islamic Architecture
 
Islamic architecture final
Islamic architecture finalIslamic architecture final
Islamic architecture final
 
Presentation Islam
Presentation IslamPresentation Islam
Presentation Islam
 
Multi storey building design of 7 storey commercial building
Multi storey building design of 7 storey commercial buildingMulti storey building design of 7 storey commercial building
Multi storey building design of 7 storey commercial building
 
Repairs and rehabilitation 2012
Repairs and rehabilitation 2012Repairs and rehabilitation 2012
Repairs and rehabilitation 2012
 
Analysis and design of a multi storey reinforced concrete
Analysis and design of a multi storey reinforced concreteAnalysis and design of a multi storey reinforced concrete
Analysis and design of a multi storey reinforced concrete
 
Reinforced slab
Reinforced slabReinforced slab
Reinforced slab
 
Engineering formula sheet
Engineering formula sheetEngineering formula sheet
Engineering formula sheet
 
Basic principles of design for rcc building
Basic principles of design for rcc buildingBasic principles of design for rcc building
Basic principles of design for rcc building
 
Design of R.C.C Beam
Design of R.C.C BeamDesign of R.C.C Beam
Design of R.C.C Beam
 
DESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRO
DESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRODESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRO
DESIGN AND ANALAYSIS OF MULTI STOREY BUILDING USING STAAD PRO
 
Design and analasys of a g+2 residential building
Design and analasys of a g+2 residential building Design and analasys of a g+2 residential building
Design and analasys of a g+2 residential building
 

Similar to Theories of market stracture 2

market - Types and their details
market - Types and their detailsmarket - Types and their details
market - Types and their details
Karan Saxena
 
Managerial economics assignment
Managerial economics assignmentManagerial economics assignment
Managerial economics assignment
GIEDEEAM SOLAR and Gajanana Publications, LIC
 
Market-and-Pricing-Strategies.pdf
Market-and-Pricing-Strategies.pdfMarket-and-Pricing-Strategies.pdf
Market-and-Pricing-Strategies.pdf
Peter Banda
 
Price and types of market
Price and types of marketPrice and types of market
Price and types of market
NEHAS360313
 
Pricing theory
Pricing theory Pricing theory
Pricing theory
Dinesh Nagar
 
Business economics 5
Business economics 5Business economics 5
Business economics 5
vibuchandran
 
Applied Economics Week 5 (Market Structures).pptx
Applied Economics Week 5 (Market Structures).pptxApplied Economics Week 5 (Market Structures).pptx
Applied Economics Week 5 (Market Structures).pptx
MariaDalangin
 
Mod 7,8
Mod 7,8Mod 7,8
Mod 7,8
Kumuda Kumud
 
14 Monopolistic competition
14 Monopolistic competition14 Monopolistic competition
14 Monopolistic competition
Shaik Mohammad Imran
 
Analysis of turbulent market environments
Analysis of turbulent market environmentsAnalysis of turbulent market environments
Analysis of turbulent market environments
umesh yadav
 
Structure of market
Structure of marketStructure of market
Structure of market
Structure of marketStructure of market
Busines Economics - Unit-5 - IMBA - Osmania University
Busines Economics - Unit-5 - IMBA - Osmania UniversityBusines Economics - Unit-5 - IMBA - Osmania University
Busines Economics - Unit-5 - IMBA - Osmania University
Balasri Kamarapu
 
Marketstructure -eco
Marketstructure -ecoMarketstructure -eco
Marketstructure -eco
Saikishore Padhi
 
Market
MarketMarket
Market
am-it
 
Market structure
Market structureMarket structure
Market structure
Mahfuzur Rahman
 
ECO Unit 3 Competition, Market Structures and Advertising2.pptx
ECO Unit 3 Competition, Market Structures and Advertising2.pptxECO Unit 3 Competition, Market Structures and Advertising2.pptx
ECO Unit 3 Competition, Market Structures and Advertising2.pptx
CIELOESTONANTO
 
Main Market Forms 2009 2
Main Market  Forms 2009   2Main Market  Forms 2009   2
Main Market Forms 2009 2
siraj2762268
 
Economics project/questions
Economics project/questionsEconomics project/questions
Economics project/questions
Naveen Katariya
 
Market-Structure.pdf
Market-Structure.pdfMarket-Structure.pdf
Market-Structure.pdf
GeeteshThakur2
 

Similar to Theories of market stracture 2 (20)

market - Types and their details
market - Types and their detailsmarket - Types and their details
market - Types and their details
 
Managerial economics assignment
Managerial economics assignmentManagerial economics assignment
Managerial economics assignment
 
Market-and-Pricing-Strategies.pdf
Market-and-Pricing-Strategies.pdfMarket-and-Pricing-Strategies.pdf
Market-and-Pricing-Strategies.pdf
 
Price and types of market
Price and types of marketPrice and types of market
Price and types of market
 
Pricing theory
Pricing theory Pricing theory
Pricing theory
 
Business economics 5
Business economics 5Business economics 5
Business economics 5
 
Applied Economics Week 5 (Market Structures).pptx
Applied Economics Week 5 (Market Structures).pptxApplied Economics Week 5 (Market Structures).pptx
Applied Economics Week 5 (Market Structures).pptx
 
Mod 7,8
Mod 7,8Mod 7,8
Mod 7,8
 
14 Monopolistic competition
14 Monopolistic competition14 Monopolistic competition
14 Monopolistic competition
 
Analysis of turbulent market environments
Analysis of turbulent market environmentsAnalysis of turbulent market environments
Analysis of turbulent market environments
 
Structure of market
Structure of marketStructure of market
Structure of market
 
Structure of market
Structure of marketStructure of market
Structure of market
 
Busines Economics - Unit-5 - IMBA - Osmania University
Busines Economics - Unit-5 - IMBA - Osmania UniversityBusines Economics - Unit-5 - IMBA - Osmania University
Busines Economics - Unit-5 - IMBA - Osmania University
 
Marketstructure -eco
Marketstructure -ecoMarketstructure -eco
Marketstructure -eco
 
Market
MarketMarket
Market
 
Market structure
Market structureMarket structure
Market structure
 
ECO Unit 3 Competition, Market Structures and Advertising2.pptx
ECO Unit 3 Competition, Market Structures and Advertising2.pptxECO Unit 3 Competition, Market Structures and Advertising2.pptx
ECO Unit 3 Competition, Market Structures and Advertising2.pptx
 
Main Market Forms 2009 2
Main Market  Forms 2009   2Main Market  Forms 2009   2
Main Market Forms 2009 2
 
Economics project/questions
Economics project/questionsEconomics project/questions
Economics project/questions
 
Market-Structure.pdf
Market-Structure.pdfMarket-Structure.pdf
Market-Structure.pdf
 

Recently uploaded

A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdfA STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
rsonics22
 
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
itnewsafrica
 
Transforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptxTransforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptx
limocaptaincom
 
PAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAA
PAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAAPAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAA
PAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAA
lawrenceads01
 
Entrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to EntrepreneurshipEntrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to Entrepreneurship
Sanjay Joshi
 
Test Bank For Principles Of Cost Accounting, 17th Edition Edward J. Vander...
Test Bank For Principles Of Cost Accounting, 	  17th Edition Edward J. Vander...Test Bank For Principles Of Cost Accounting, 	  17th Edition Edward J. Vander...
Test Bank For Principles Of Cost Accounting, 17th Edition Edward J. Vander...
kevinkariuki227
 
Top Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdfTop Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdf
Top IT Marketing
 
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAAPETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
lawrenceads01
 
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Philip M Caputo
 
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
APKs Pure
 
THE IMPORTANCE OF CODING IN DEVOPS EXPLANATION
THE IMPORTANCE OF CODING IN DEVOPS EXPLANATIONTHE IMPORTANCE OF CODING IN DEVOPS EXPLANATION
THE IMPORTANCE OF CODING IN DEVOPS EXPLANATION
hrajkumar444
 
Managing Customer & User Experience of Customers
Managing Customer & User Experience of CustomersManaging Customer & User Experience of Customers
Managing Customer & User Experience of Customers
SalmanTahir60
 
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
projectseasy
 
BBA Final SML 501 INTERNATIONAL BUSINESS .pdf
BBA Final SML 501 INTERNATIONAL BUSINESS .pdfBBA Final SML 501 INTERNATIONAL BUSINESS .pdf
BBA Final SML 501 INTERNATIONAL BUSINESS .pdf
mcdopex6
 
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
Growth Buyouts - The  Dawn of the GBO (Slow Ventures)Growth Buyouts - The  Dawn of the GBO (Slow Ventures)
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
Razin Mustafiz
 
Importance of Quality Transformations in VUCA World
Importance of Quality Transformations in VUCA WorldImportance of Quality Transformations in VUCA World
Importance of Quality Transformations in VUCA World
Ankur860831
 
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصريشركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
إبراهيم العرجاني
 
Mandated reporting powerpoint to help with understanding your role
Mandated reporting powerpoint to help with understanding your roleMandated reporting powerpoint to help with understanding your role
Mandated reporting powerpoint to help with understanding your role
khidalgo2
 
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in CityGirls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
maigasapphire
 
Corporate Governance for South African Mining Companies
Corporate Governance for South African Mining CompaniesCorporate Governance for South African Mining Companies
Corporate Governance for South African Mining Companies
James AH Campbell
 

Recently uploaded (20)

A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdfA STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
 
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
 
Transforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptxTransforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptx
 
PAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAA
PAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAAPAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAA
PAWFESSIONAL ELVA MAX.pdfAAAAAAAAAAAAAAAAAAA
 
Entrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to EntrepreneurshipEntrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to Entrepreneurship
 
Test Bank For Principles Of Cost Accounting, 17th Edition Edward J. Vander...
Test Bank For Principles Of Cost Accounting, 	  17th Edition Edward J. Vander...Test Bank For Principles Of Cost Accounting, 	  17th Edition Edward J. Vander...
Test Bank For Principles Of Cost Accounting, 17th Edition Edward J. Vander...
 
Top Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdfTop Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdf
 
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAAPETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
 
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
 
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
 
THE IMPORTANCE OF CODING IN DEVOPS EXPLANATION
THE IMPORTANCE OF CODING IN DEVOPS EXPLANATIONTHE IMPORTANCE OF CODING IN DEVOPS EXPLANATION
THE IMPORTANCE OF CODING IN DEVOPS EXPLANATION
 
Managing Customer & User Experience of Customers
Managing Customer & User Experience of CustomersManaging Customer & User Experience of Customers
Managing Customer & User Experience of Customers
 
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
 
BBA Final SML 501 INTERNATIONAL BUSINESS .pdf
BBA Final SML 501 INTERNATIONAL BUSINESS .pdfBBA Final SML 501 INTERNATIONAL BUSINESS .pdf
BBA Final SML 501 INTERNATIONAL BUSINESS .pdf
 
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
Growth Buyouts - The  Dawn of the GBO (Slow Ventures)Growth Buyouts - The  Dawn of the GBO (Slow Ventures)
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
 
Importance of Quality Transformations in VUCA World
Importance of Quality Transformations in VUCA WorldImportance of Quality Transformations in VUCA World
Importance of Quality Transformations in VUCA World
 
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصريشركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
 
Mandated reporting powerpoint to help with understanding your role
Mandated reporting powerpoint to help with understanding your roleMandated reporting powerpoint to help with understanding your role
Mandated reporting powerpoint to help with understanding your role
 
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in CityGirls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
 
Corporate Governance for South African Mining Companies
Corporate Governance for South African Mining CompaniesCorporate Governance for South African Mining Companies
Corporate Governance for South African Mining Companies
 

Theories of market stracture 2

  • 1. Presented by Martin, Otundo Richard---HD417-C005-0151/15 Kathata, Patrick Meeme---HD417-C005-2983/15 Kazungu Johnson ---HD417 – C005 - 0115/2015 PhD 2015 COURSE LECTURER: Dr. Sakwa
  • 2. General Objective: The focus of this lecture is the four market structures. Students will learn the characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Using the cost schedule from the previous lecture, the idea of profit maximization is explored.
  • 3. SPECIFIC OBJECTIVES: To, 1. Identify various determinants of various market structures. 2. Be able to categorize the various models of market structure. 3. Describe the assumptions of these market structures. 4. Explain the relevance of these market structures.
  • 4. Market Structures Definition  Market structure is defined by economists as the characteristics of the market.  It can be organizational characteristics or competitive characteristics or any other features that can best describe a goods and services market.  The major characteristics that economist have focused on in describing the market structures are the nature of competition and the mode of pricing in that market.  Market structures can also be described as the number of firms in the market that produce identical goods and services.  The market structure has great influence on the behavior of individuals firms in the market.
  • 5. Features of market structure  The number of firm operating in a market; It will cover both the local and foreign markets.  The concentration ratio of company; this will show the market share held by the large companies.  The amount and nature of costs in the market; It will show how the different costs affect the contestability in the market. It will include the economies of scale and the presence of sunk costs.  The degree of vertical integration; Vertical integration is the process of combining the different stages of production and distribution to be managed by a single enterprise.  The levels of product differentiation  The market churn or the customer’s turnover; this will give the number of consumer that are willing to change their consumers over a specific period of time when there are market changes. The market rate of market churn is an indicator of the level of brand loyalty and influence of marketing and advertising on customer’s choice.
  • 6. The Four Major Market Structures Monopoly: A monopoly exists when one company and one only provides services in a particular industry, or one company dominates and consumers cannot substitute anything that comes close. Today, very few industries are monopolies. Utility companies such as water companies or electric companies may be considered monopolies. Consumers can't exactly substitute something else for electricity from the local provider, unless they switch to firewood and candles! Oligopoly: An oligopoly consists of only a handful of companies selling similar products. Consumers can substitute products, but only one company's offerings for another. An example would be the three big American car companies of today: Ford, GM and Chrysler. Monopolistic Competition: In monopolistic competition, many sellers sell different products. It's very similar to competition, below, with the exception that the products themselves are a bit different from one another, so consumers look for those differences rather than price differences. Competition: In markets with perfect competition, there are no barriers to entry, and many offering different goods. Consumers often shop on price differences alone. Wal Mart may be viewed as a purely competitive company within the grocery industry for its super centers that offer lower prices than competing grocery chains.
  • 7. Major Factors which Determine the Market Structure of an Industry 1. Number of Buyers and Sellers: Number of buyers and sellers of a commodity in the market indicates the influence exercised by them on the price of the commodity. In case of large number of buyers and sellers, an individual buyer or seller is not in the position to influence the price of the commodity. However, if there is a single seller of a commodity, then such a seller exercises great control over the price. 2. Nature of the Commodity: If the commodity is of homogeneous nature, i.e. identical in all respects, then it is sold at a uniform price. However, if the commodity is of differentiated nature (like different brands of toothpaste), then it may be sold at different prices. Again, if the commodity has no close substitutes (like Railways), then the seller can charge higher price from the buyers.
  • 8. 3. Knowledge of Market Conditions: If buyers and sellers have perfect knowledge about the market conditions, then a uniform price prevails in the market. However, in case of imperfect knowledge, sellers are in a position to charge different prices. 4. Mobility of Goods and Factors of Production: When the factors of production can move freely from one place to another, then a uniform price prevails in the market. However, in case of immobility of goods and factors, different prices may prevail in the market.
  • 9. 5. Freedom of Movement of Firms: If there is freedom of entry and exit of firms, then price will be stable in the market. However, if there are restrictions on entry of new firms and exit of old firms, then a firm can influence the price as it has no fear of competition from other or new firms.
  • 10. MODELS OF MARKET STRUCTURES i. Monopolistic competition, a type of imperfect competition such that many producers sell products or services that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms ii. Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. i. Duopoly, a special case of an oligopoly with two firms. iii. Monopsony, when there is only a single buyer in a market. iv. Oligopsony, a market where many sellers can be present but meet only a few buyers. v. Monopoly, where there is only one provider of a product or service. i. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms. vi. Perfect competition, a theoretical market structure that features no barriers to entry, an unlimited number of producers and consumers, and a perfectly elastic demand curve.(N/B: This Done in Above)
  • 11. What are the main assumptions for a perfectly competitive market? • Many sellers in the market - each of whom produce a low percentage of market output and cannot influence the prevailing market price – each firm in this market is a price taker - i.e. it has to take the market price • Many individual buyers - none has any control over the market price • Perfect freedom of entry and exit from the industry. Firms face no sunk costs and entry and exit from the market is feasible in the long run. This assumption means that all firms in a perfectly competitive market make normal profits in the long run • Homogeneous products are supplied to the markets that are perfect substitutes. This leads to each firms being “price takers" with a perfectly elastic demand curve for their product • Perfect knowledge – consumers have all readily available information about prices and products from competing suppliers and can access this at zero cost – in other words, there are few transactions costs involved in searching for the required information about prices. Likewise sellers have perfect knowledge about their competitors • Perfectly mobile factors of production – land, labour and capital can be switched in response to changing market conditions, prices and incentives. We assume that transport costs are insignificant • No externalities arising from production and/or consumption
  • 12. Model Assumptions: Monopolistic Competition .  Many, many firms produce in a monopolistically competitive industry. This assumption is similar to that found in a model of perfect competition.  Each firm produces a product that is differentiated (i.e., different in character) from all other products produced by the other firms in the industry. Thus one firm might produce a red toothpaste with a spearmint taste, and another might produce a white toothpaste with a wintergreen taste. This assumption is similar to a monopoly market that produces a unique (or highly differentiated) product.  The differentiated products are imperfectly substitutable in consumption. This means that if the price of one good were to rise, some consumers would switch their purchases to another product within the industry. From the perspective of a firm in the industry, it would face a downward-sloping demand curve for its product, but the position of the demand curve would depend on the characteristics and prices of the other substitutable products produced by other firms. This assumption is intermediate between the perfectly competitive assumption in which goods are perfectly substitutable and the assumption in a monopoly market in which no substitution is possible.
  • 13.  There is free entry and exit of firms in response to profits in the industry. Thus firms making positive economic profits act as a signal to others to open up similar firms producing similar products. If firms are losing money (making negative economic profits), then, one by one, firms will drop out of the industry. Entry or exit affects the aggregate supply of the product in the market and forces economic profit to zero for each firm in the industry in the long run. (Note that the long run is defined as the period of time necessary to drive the economic profit to zero.) This assumption is identical to the free entry and exit assumption in a perfectly competitive market.  There are economies of scale in production (internal to the firm). This is incorporated as a downward-sloping average cost curve. If average costs fall when firm output increases, it means that the per-unit cost falls with an increase in the scale of production. Since monopoly markets can arise when there are large fixed costs in production and since fixed costs result in declining average costs, the assumption of economies of scale is similar to a monopoly market.
  • 14.  Few firms dominate an industry.  Large proportion of industry's output is shared by a few firms.  High barriers to entry may be due to economics of scale, legal barriers, aggressive tactics such as advertising or high startup costs  Products may be identical or differentiated.  Firms are interdependent and take careful notice of each other's actions.
  • 15. 1. Seller Influence on price- Sellers are price makers 2. Extent of strategic behaviour -Sellers do not behave strategically. 3. Conditions of Entry -Entry into the market is completely blocked 4. Buyer Influence on Price-Buyers are price takers
  • 16. Many small producers such that no one can influence price. Firms are price takers in the market. So many firms that no one firm can influence price Homogeneous product Factor (Resource) mobility
  • 17. Cont. .Perfect information - no trademarks, patents, exclusive knowledge Market entry and exit No government influence or interference Rationality of all market actors (maximize utility) Prices determined by the interaction of supply & demand
  • 18. Relevance of Monopoly as Market structure  Stability of prices in a monopoly market the prices are most of the times stable. Because there is only one firm involved in the market that sets the prices if and when it feels like.  Source of revenue for the government in form of taxation from monopoly firms.  Massive profits due to the absence of competitors which leads to high number of sales monopoly firms tend to receive super profits from their operations.  Monopoly firms offer some services effectively and efficiently.
  • 19.  Oligopoly refers to an industry dominated by a small number of sellers with market power.  They have the ability to limit or discount competition, and artificially earn excess profits.  U. S. cell phone providers are often cited as a clear example of oligopoly, as the major providers effectively control the market.  They set market prices for their goods or services.
  • 20.  In Kenya Safaricom and other telecommunications almost controls the rates of communication within the telecommunication industry.  Airline like KQ tends to look like it sets the base of business in the country and many more.  Cellphone companies  Large Banks(AfDB, Equity Bank, Barclays).  Large Credit Agencies (Visa, Mastercard, Discover)  They are oligopolies because they have control of and effect the market in the same way a single company controls a market with a monopoly - its the same thing end effect - just more than one company.
  • 21.  In the real world it is hard to find examples of industries which fit all the criteria of ‘perfect knowledge’ and ‘perfect information’. However, some industries are close.  Foreign exchange markets. Here currency is all homogeneous. Also traders will have access to many different buyers and sellers. There will be good information about relative prices. When buying currency it is easy to compare prices
  • 22.  Agricultural markets. In some cases, there are several farmers selling identical products to the market, and many buyers. At the market, it is easy to compare prices. Therefore, agricultural markets often get close to perfect competition.  Internet related industries. The internet has made many markets closer to perfect competition because the internet has made it very easy to compare prices, quickly and efficiently (perfect information). Also, the internet has made barriers to entry lower. For example, selling a popular good on internet through a service like e-bay is close to perfect competition. It is easy to compare the prices of books and buy from the cheapest. The internet has enable the price of many books to fall in price, so that firms selling books on internet are only making normal profits.
  • 23. Toothpaste Market:  When you walk into a departmental store to buy toothpaste, you will find a number of brands, like Aquifresh, Colgate, Whitedent, Paradox, etc. i. On one hand, the market for toothpaste seems to be full of competition, with thousands of competing brands and freedom of entry. ii. On the other hand, its market seems to be monopolistic, due to uniqueness of each toothpaste and power to charge different price.  Such a market for toothpaste is a monopolistic competitive market.
  • 24. In summary, In many markets, such as toothpastes and toilet paper, producers practice product differentiation by altering the physical composition of products, using special packaging, or simply claiming to have superior products based on brand images or advertising.
  • 25.  Krugman, Paul; Obstfeld, Maurice (2008). International Economics: Theory and Policy. Addison-Wesley. ISBN 0-321-55398-5.  Jump up ^ Poiesz, Theo B. C. (2004). "The Free Market Illusion Psychological Limitations of Consumer Choice" (PDF). Tijdschrift voor Economie en Management 49 (2): 309–338.  Charles I. Jones, (2002)Introduction to Economic Growth, W.W: Norton & Company