Download Market structures - economics

Apphia M. Nicholi R. Jeremiah W. Rashad M. Kaleb E. Jeneya N.
What is a Market Structure?
A market structure is defined as the features that determine the behaviour and
performance of firms in the industry.
In the economy there are four (4) main market structures:
 Perfect Competition
 Monopoly
 Monopolistic Competition and
 Oligopoly
Monopoly:
Monopoly is a market structure characterized by a single seller, selling a unique
product in the market .In a monopoly market , the seller faces no competition as
he is the sole seller of goods with no close substitute.
Oligopoly:
Oligopoly is a market dominated by a small number of firms who realize they
are interdependent in their pricing and output policies
Monopolistic Competition:
Monopolistic competition characterizes an industry in which many firms offer
products or services that are similar (but not perfect) substitutes.
Perfect Competition:
Perfect competition in economics is when all companies sell identical products,
market share does not influence price, companies are able to enter or exit
without barrier, buyers have perfect or full information, and companies cannot
determine price.
Apphia M. Nicholi R. Jeremiah W. Rashad M. Kaleb E. Jeneya N.
Characteristics/features of the market structures:
Monopoly
No. of sellers
No. of buyers
Product
one
many
unique
Knowledge
of market
Price
imperfect
Entry
conditions
price-maker
no free entry
Oligopoly
Monopolistic
Competition
few
many
many
many
homogeneous/ differentiated
differentiated
imperfect
imperfect
price-maker
with price
rigidity
high barriers
to entry
Perfect
competition
many
many
homogeneous
perfect
price-maker
price-maker
low barriers to
entry
freedom of
entry
Advantages of the market structures:
Monopoly;
Research and development:
Monopolies can make supernormal profit, which can be used to fund high-cost
capital investment spending. Successful research can be used for improved
products and lower costs in the long term.
Economies of scale:
Increased output will lead to a decrease in average costs of production. These
can be passed on to consumers in the form of lower prices.
Oligopoly;
Oligopolies may adopt a highly competitive strategy, in which case they
can generate similar benefits to more competitive market structures, such
as lower prices.
Even though there are a few firms, making the market uncompetitive,
their behaviour may be highly competitive.
Apphia M. Nicholi R. Jeremiah W. Rashad M. Kaleb E. Jeneya N.
Price stability may bring advantages to consumers and the macroeconomy because it helps consumers plan ahead and stabilises their
expenditure, which may help stabilise the trade cycle.
Monopolistic Competition;
a few barriers to entry.
active business environment.
customers can obtain a great variety of products and services since they
are differentiated.
consumers are informed about goods and services available in the market.
higher quality of products.
Perfect Competition;
They can achieve the maximum consumer surplus and economic welfare.
All the perfect knowledge is available so there is no information failure.
Disadvantages of the market structures:
Monopoly;
restricting the consumer's choice to only one:
Since the market is monopolized, the consumer will find themselves having to
choose that one firm that controls the market resulting in no sovereignty for the
consumer.
Lack of competition and innovation:
Since there is one firm controlling the market, you will find that the firm won't
really innovate its product or service due to the fact that there is no other
company fighting for the consumer money.
Oligopoly;
limited customer choice:
The consumer won’t have as many choices when it comes to the product or
service they want.
high barriers to entry
If an entrepreneur wants to enter this market it will be a difficult process
because the company has already established its brand and accumulated its
consumers.
Monopolistic Competition;
impossibility to obtain abnormal profits:
Apphia M. Nicholi R. Jeremiah W. Rashad M. Kaleb E. Jeneya N.
As an entrepreneur in this market it will be impossible to make a lot of profits
due to the amount of competition.
Lack of development:
There is no courage to develop new technology because of the perfect
knowledge and the ability to share all of the information.
Perfect Competition;
misleading advertising:
Due to a lot of competition you will find that some companies will use false
advertising to gain customers.
Alot counterfeit:
some entrepreneurs may proceed to counterfeit the product of successful brand
resulting in some consumer buying the fake goods thinking they got the original
product.
Examples of the market structures:
Examples Of Monopoly:
1.WASA
2.T&TEC
Examples Of Oligopoly:
1.Cell Service Companies (Digicel & Bmobile)
3.Airline Companies (Caribbean Airlines)
Examples Of Monopolistic Competition:
1.Restaurants (KFC And Pizza Hut Etc.)
2.Gucci
3.Louis Vuitton
Examples Of Perfect Competition:
1.Mask Sellers
2.Tomato Venders
3.Doubles Venders
Examples Of Monopoly
1.WASA
2.T&TEC