1 / 6

Concentrated Markets

Concentrated Markets. Unit 2 – Lesson 7. What is a Concentrated Market?. In a concentrated market structure there are fewer producers and they have more control over prices.  This means that they are in a better position to keep prices and profits higher than in a competitive market.

necia
Download Presentation

Concentrated Markets

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Concentrated Markets Unit 2 – Lesson 7

  2. What is a Concentrated Market? • In a concentrated market structure there are fewer producers and they have more control over prices.  • This means that they are in a better position to keep prices and profits higher than in a competitive market.

  3. How does a Concentrated Market work? • There are certain criteria that must be present in order for the producers to maintain a higher price than in a competitive market: • the producers must have an agreement on price and output • new producers, both foreign and domestic, must be kept out of the market • and demand for the product must be inelastic

  4. How does a Concentrated Market work? • Because there are fewer companies in the market, there is less competition and it is easier to reach an agreement, formal or informal, on a higher price. • In this way the companies do not undercut each other and they all make more money.  • The quantity supplied may be controlled in order to maintain the higher price.

  5. How does a concentrated market work? • In order for a price agreement to be maintained • the number of producers must be kept small • and new producers must be kept out of the market. • This is most easily achieved for products that are difficult to produce, have prohibitive start-up costs, or are already dominated by large powerful companies such as oil companies.

  6. Concentrated Markets • In order to maintain higher prices and profits, the demand for the product must be inelastic with no close substitutes.  • Frequently concentrated markets are created or maintained by corporate mergers. If markets get too concentrated, it can be detrimental to consumers who are forced to pay higher prices.

More Related