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Market Structures

Market Structures. Market Structures. What is the primary aim/goal of businesses? To maximize profits What is competition? Striving against others to reach an objective. 4 Types of Market Structure. Pure/Perfect Competition Large number of buyers and sellers Identical product

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Market Structures

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  1. Market Structures

  2. Market Structures • What is the primary aim/goal of businesses? • To maximize profits • What is competition? • Striving against others to reach an objective

  3. 4 Types of Market Structure • Pure/Perfect Competition • Large number of buyers and sellers • Identical product • Well informed buyers and sellers • Price Takers! • Low barriers for entry/exit More Competition Less Competition

  4. Pure/Perfecct Competition Many buyer/sellers + Identical Products

  5. Imperfect Competition • Most USA markets are imperfect competition • Farming is perfectly competitive. • A market is imperfect when it lacks one or more of the characteristics of Perfect Competition

  6. Monopolistic competition Large # of Buyers and sellers Product Differentiation Non Price Competition Most markets in USA are monopolistic competition Forms of Imperfect Competition

  7. Monopolistic Competition • Meets all condition of perfect competition except for identical products. • Product differentiation • Monopolistic competitors use nonprice competition • Advertising, giveaways, or other promotions More Competition Less Competition

  8. What are some examples?

  9. Monopolistic Competition Gap Levis Lucky Same as pure competition except for product differentiation

  10. Review • Classify each product as perfect comp (pc) or monopolistic comp (mc) • Toothpaste • Wheat • Coal • Books • CDs • Computer software • http://www.youtube.com/watch?v=9Hxy-TuX9fs&feature=related

  11. Oligopoly • A fewvery large sellers dominate the industry • Oligopolists act independently by lowering prices soon after the first seller announces the cut • Collusion: formally agree to set prices • Heterogeneous products • Engage in price wars • High barriers to entry More Competition Less Competition

  12. What are some examples?

  13. Oligopoly Few producers control supply and price

  14. Coca-Cola classic Sprite Dasani Barq's Dannon Nestea Rockstar Evian Fanta Fresca Minute Maid Mr. Pibb Powerade Seagrams Ginger Ale & Mixers TAB Coca-Cola Classic

  15. Aquafina Pepsi Mountain Dew Sierra Mist Sobe Lipton Brisk Tea MUG Root Beer Slice Gatorade Dole Juice Tropicana Pepsi-co

  16. Cadbury Schweppes • 7 Up • Canada Dry • Clamato • Dr Pepper • Hawaiian Punch • Mott's • Orangina • Snapple

  17. Toyota • Toyota • Scion • Lexus

  18. Chrysler • Chrysler • Jeep • Dodge

  19. General Motors • Chevrolet • Buick • Pontiac • GMC • Saturn • Hummer • SAAB • Cadillac

  20. What is missing?

  21. Monopoly • Only one seller of a particular product • Few monopolies

  22. Monopoly • One seller dominates the market with no close substitutes • Sets prices • High barriers More Competition Less Competition

  23. Monopoly • Natural Monopoly - efficient production by a single supplier

  24. Monopoly • Geographic Monopoly - small town

  25. TechnologicalMonopoly • In order for the inventor to make money and keep new ideas flowing • Patients on inventions

  26. Government Monopoly • It is a product that the government should provide because they are the government • National defense, disposal of nuclear materials

  27. Market Failures • Inadequate Competition • Lack of competition which causes either buyers or sellers to control the market • Inadequate Information • Consumers or producers lack enough information about a market to allow it to work properly • Externalities • Unintended positive or negative side-effects to a 3rd party because of a market transaction • What are some examples? • http://www.youtube.com/watch?v=DOuBxJNIFkY&feature=related • Public Goods • Goods used by all and directly paid for by none • What are some examples?

  28. 4 Ways the Government regulates businesses • 1- Anti-trusts Laws • 2- Non-discrimination laws • 3-Public Disclosure • 4-Federal Agencies p. 180

  29. 3-2-1 • 3 things you learned • 2 things you want to learn more about • 1 question

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