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BUSINESS economics

BUSINESS economics. Class 3 14 April, 2010. Market Structures. Monopoly – One price offer Duopoly – Two price offers Oligopoly – Few price offers Perfect Competition – Many price offers. Monopoly.

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BUSINESS economics

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  1. BUSINESS economics Class 3 14 April, 2010

  2. Market Structures • Monopoly – One price offer • Duopoly – Two price offers • Oligopoly – Few price offers • Perfect Competition – Many price offers

  3. Monopoly • Monopoly (single seller) - exists when a specific individual or an enterprise has sufficient control over a particular product/service to determine significantly the terms on which other individuals shall have access to it. • Lack of economic competition • Monopsony – single buyer • Formed by force, by law, naturally, integration • Regulated in India by MRTP Act • Examples: Indian Railways, Armed Forces

  4. Imperfect Competition • More than one seller or buyer • Control of price is not determined by the market • Duopoly, Oligopoly, Cartel • Examples: Oil companies • The Rule of Three (Sheth & Sisodia) • Game Theory and Prisoner’s dilemma

  5. Perfect Competition • Infinite Buyers/Infinite Sellers – Infinite consumers with the willingness and ability to buy the product at a certain price, Infinite producers with the willingness and ability to supply the product at a certain price. • Zero Entry/Exit Barriers – It is relatively easy to enter or exit as a business in a perfectly competitive market. • Perfect Information - Prices and quality of products are assumed to be known to all consumers and producers. • Transactions are Costless - Buyers and sellers incur no costs in making an exchange.  • Firms Aim to Maximize Profits - Firms aim to sell where marginal costs meet marginal revenue, where they generate the most profit. • Homogeneous Products – The characteristics of any given market good or service do not vary across suppliers.

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