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The Competitive Market

The Competitive Market. Chapter 3.1. Introduction. How many cell phone styles are available for you to purchase? Where can you purchase jeans? From which companies can you buy uniform items? Do you have a choice when it comes to buying a car?. Introduction.

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The Competitive Market

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  1. The Competitive Market Chapter 3.1

  2. Introduction • How many cell phone styles are available for you to purchase? • Where can you purchase jeans? • From which companies can you buy uniform items? • Do you have a choice when it comes to buying a car?

  3. Introduction • How would your life and/or buying patterns be different if you didn’t have • A choice? • Variety of services/products? • Competition among companies?

  4. Competition in a Free Market • Free Market • Business is free to earn profit • Any business • We have the right to hold private property • We decide what to do with our property, equipment, materials, etc. • Competition is allowed (and encouraged) • Some countries do not allow free markets – ie., North Korea

  5. Competition in a Free Market • Profit • Profits drive business • Profits can be reinvested in new technology, business growth, and/or paying off debt • Portion of profits go to taxes

  6. Types of Competition • Four categories of competition: • Perfect competition • Monopolistic competition • Oligopoly • Monopoly

  7. Perfect Competition • A market that is characterized by a large number of small companies, none of which have an opportunity for market control • Agricultural markets

  8. Monopolistic Competition • A market consisting of a large number of companies, each having an opportunity for a degree of market control • Restaurants • Clothing • Films

  9. Oligopoly • A market with a small number of large companies, each with a substantial amount of market control • Beer • Tobacco • Aircrafts • Automobile

  10. Monopoly • A market in which a single company has complete market control • Post office • Bell Canada (used to be) • LCBO • In Canada, monopolies are regulated by the government

  11. The Benefits of Competition • Encourages the creation of new businesses • Provides a wide selection of goods and services offered to the consumers in the marketplace • Lower prices for the customer

  12. The Benefits of Competition • Promotes the creation of new technology that improves our standard of living • Increases productivity by using fewer resources or by becoming more efficient

  13. Direct and Indirect Competition • Direct competition • Products in the same product category which are very similar are in direct competition (i.e. Colossus and AMC or Coke and Pepsi) • Indirect competition • Products that are not in the same product category which are not directly related to each other (i.e. Colossus and Wonderland or Coke and Pizza Pizza)

  14. Go on the computers and find 3 examples of each of the four categories of competition and explain why they belong in that category. Findings will be presented to the class! Using the following product categories, list 2 pairs of products that are in direct and indirect competition with each other. Food and beverage, automotive, travel, and entertainment Findings will be presented to the class! Half the class will….

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