1 / 13

A Spectrum of Markets

A Spectrum of Markets. Activity #1 – Tacit Bargaining. Page 142 - Textbook. From Pure Competition to Pure Monopoly. Decreasing competition Fewer companies Increasing control over price. Perfect Competition.

zorion
Download Presentation

A Spectrum of 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. A Spectrum of Markets

  2. Activity #1 – Tacit Bargaining • Page 142 - Textbook

  3. From Pure Competition to Pure Monopoly Decreasing competition Fewer companies Increasing control over price

  4. Perfect Competition • Are markets in which uniform goods are bought and sold, and where prices are generally known • Competition between many buyers and sellers (no attempt to fix prices – price takers) • No barriers from entering a PC market. • Rare • Example: Stock Exchange & Farmers’ markets come closest to attaining PC conditions.

  5. Monopoly • There is only one producer of a good or service and many buyers. • Examples: natural gas supply, electricity supply • “Price maker”-sole supplier • Usually government monitoring and intervention • Protect the consumer • Cartels/combines: an organization of independent producers that enter into an agreement to fix output or prices. Such agreements are usually illegal. • Not sustainable – illegal, high profits attract other firms

  6. Oligopoly • A few firms supply most of the goods and services • Example: Steel and automobile markets • Ford, Nissan, Honda, Volkswagen • Homogenous Oligopoly – goods produced are of the same kind • A litre of gas at Shell is the same at an Esso station • Steel produced is indistinguishable • Differentiated Oligopoly – firms attempt to make their products distinctive/unique • Automobiles, tires, breakfast cereals

  7. Oligopolies Continued… • Difficult to enter industry • Require large-scale operations for their manufacturing (huge capital investment) • Use advertising • Careful monitoring of other firms • Influences each others’ actions • Cooperation between firms lead to higher prices

  8. Monopolistic Competition • Is a market situation in which there are many sellers providing a similar but not identical good or service. • Example: fast-food and haircuts • Some control over price • Entry into the business is relatively easy • Smaller start-up costs • Each firm has a “monopoly” over the product it serves and the way it is served.

  9. Restricting Competition • 1. Through unfair competition • Large companies drop prices to drive out smaller companies. • 2. Cartels • Fixing output and prices • 3. Interlocking Directorates • Person on board of directors of a number of competing companies – policies coordinated to lower competition. • 4. Mergers • Combining of the assets of two companies into a single company. • 5. Holding Companies • A company that is set up to hold (or own) a significant proportion of the shares of other companies. (control activities of these other companies)

  10. Activity – Group Puzzle! • Spectrum of markets table. • Re-creating figure 7.5

  11. Activity #2 – Gas station game • Page 143 - Textbook

  12. End of Chapter Questions • Page 151- 155 5. Parking lot 6. Gasoline Prices 7. A Mystery Story Case study: Coffee Prices

  13. Khan Academy Videos • https://www.khanacademy.org/economics-finance-domain/microeconomics/perfect-competition-topic

More Related