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35 Cards in this Set
- Front
- Back
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– a place where buying and selling take place at a particular time where one price prevails. |
Market |
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refers to the characteristics of a market that determine the behavior of buyers and sellers, and the prices and quantities of goods and services exchanged |
Market structures |
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It also refers to a group of firms or individuals that communicate with each other in the purchase and sale of goods services/resources |
Market |
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Sellers’ market structures |
1. Pure competition 2. Imperfect competition |
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1. Pure competition |
Large number of buyers and sellers Homogeneous products Absence of artificial restraints Mobility of resources |
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2. Imperfect competition |
If the firm is large enough to influence the market, may be due to barriers to entry/exit from the market of firms Government may set a price so low that price of the good or service is less than the average cost of production Control of input supply Government franchises Tariffs Quality standards Patents, trade secrets, brand names |
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Pure Comptition Benefits |
Efficient allocation of resources Low prices Innovation
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Pure Competition Drawbacks |
Limited profit Lack of innovation Lack of diversity |
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Imperfect Competition |
Monopoly Oligopoly Monopolistic |
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Monopoly |
One firm selling a product that has no good substitutes Product has zero cross elasticity with other products |
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Imperfect Competition Benefits |
Economies of scale Incentive for innovation Consistent quality |
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Imperfect Competition Drawbacks |
Higher prices Lack of choice Deadweight loss |
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Oligopoly |
Few sellers who are interdependent Pure oligopoly – homogeneous products Differentiated oligopoly – products differ in design, quality, other characteristics |
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homogeneous products
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Pure oligopoly |
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products differ in design, quality, other characteristics |
Differentiated oligopoly – |
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Monopolistic competition
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Many sellers of differentiated products Firms have some control over price because of product differentiation Free entry and exit |
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Monopolistic Competition Benefits |
Consumer choice Innovation Advertising increase competition. |
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Monopolistic Competition Drawbacks |
Higher prices Deadweight loss Lack of efficiency |
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Large number of buyers and sellers
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Pure competition |
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Homogeneous products
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Pure competition |
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Absence of artificial restraints Mobility of resources |
Pure competition |
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If the firm is large enough to influence the market, may be due to barriers to entry/exit from the market of firms
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Imperfect competition |
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Government may set a price so low that price of the good or service is less than the average cost of production
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Imperfect competition |
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Control of input supplyGovernment franchises
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Imperfect competition |
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Tariffs Quality standards Patents, trade secrets, brand names |
Imperfect competition |
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Many sellers of differentiated products |
Monopolistic competition |
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Firms have some control over price because of product differentiation |
Monopolistic competition |
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Free entry and exit |
Monopolistic competition |
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Few sellers who are interdependent |
Oligopoly |
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Buyers market structure |
1. Monopsony - only one buyer exists 2. Oligopsony few buyers exist 3. Pure competition - many buyers exist |
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- only one buyer exists
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Monopsony |
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few buyers exist
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Oligopsony |
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many buyers exist |
3. Pure competition - |
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Consider relative prices and transportation, determine which product should be availale from foresr resources |
Product mix |
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Level of processing done maybe at processing site |
Degree of processing integration |
