Learning focus Concept of the market structure; Perfect and imperfect competition; Identify monopoly, oligopoly and monopolistic competition with examples. Features of different market structures. A market is where sellers meet buyers to exchange goods or services through the co-ordination of a price system (P.241).

What is a “MARKET” ?

“MARKET” ? In Economics, a market is defined as a context in which exchange of goods and services between sellers and buyers takes place. A market exists whenever a transaction is made.

1. 在經濟學上，市場是買賣雙方交易物品或服 務的環境。 網上購物 Admart Amazon.com 郵購郵購 在商店內購物

Definition of market structure Market structure (P.242) is the set of conditions under which buyers and sellers interact in the market ( 買家與賣家在市場上的關係稱為市場結構。 ). There are different relationships between buyers and sellers. These lead to different market structures.

Concept Tour

Four features (P.243) : 1. Large No. of Buyers & Sellers ( 購 買者及供給者的數目眾多 ) 2. Homogeneous 同質 Products 3. Free 自由 Entry 進 & Exit 出 4. Perfect 完全 Market Information 信 息

Large No. of Buyers & Sellers the action of an individual buyer or seller is unable to affect the market price Buyers Sellers

Homogeneous Products the products in the market must be identical in the eyes of consumers

不同商店和報攤 所售賣的報紙都 是一樣的

Free Entry and Exit No restriction. Welcome to Perfectly Competitive Market Exit!! Entry!!

Perfect Market Information Buyers & Sellers know all market information about goods e.g. PriceQuality Q uantity

Example: The stock exchange is a close (but not) example

Imperfect competition The market is under imperfect competition (P.242) when some of the four conditions for perfect competition do not exist. There are many types of imperfect competition, depending on which condition is not met. In the real world, market competition tends to be imperfect. Guided MCQ Practice Guided Essay Class Work Practice

Same as M.C. & O. Four Features: 1.Only One seller in the whole market 2.No close substitute 3.Highly Difficult (even impossible) to Entry 4.Imperfect (highly restricted) Market Information

Only One Seller in the Whole Market buyers can obtain the goods or services from the monopolist only

Highly Difficult (even impossible) to entry it is because of monopoly power Sources of Monopoly Power government ownership government franchise ownership of important resources huge capital requirement & economies of scale No Entry!!

No Close Substitutes buyers are difficult to find another good to satisfy the same want

Does a monopolist face competition?(P.247) Real World Example

Why do monopolies exist? (P.249) Real World Example NMReal World Example Real World Example GOReal World Example Real World Example IReal World Example Real World Example PReal World Example

Features: 1. A Few Dominant Sellers 2. Entry is Restricted 3. Similar but Differentiated Products 4. Imperfect Market Information Same as Monopoly & M.C.

A few dominant sellers Oligopolists have to consider the reactions of other firms before making any decision price rigidity price leadership non-price competition Market behavior:

Similar but Differentiated Products the products are close substitutes to one another

Entry is Restricted it is difficult because of government regulation / huge capital / technological requirements Imperfectly Competitive Market Entry?

Examples

Examples of oligopolies (P.253) Guided Essay Class Work PracticeGuided Essay Class Work Practice

Monopolistic competition (P.256) Monopolistic competition refers to a market where some of the characteristics of monopoly and perfect competition are present.

Four Features: 1. Large No. of Buyers & Sellers 2. Differentiated Products 3. Free Entry & Exit 4. Imperfect Market Information Same as P.C. Same as P.C.

Product Differentiation A firm can use product differentiation to promote sales. Techniques are: new designs advertising brand name

Imperfect Information of the Market Sellers & Buyers don’t have perfect info. on price & quality of goods

Example: Guided MCQ PracticeGuided MCQ Practice Rice is an example Multimedia Showroom Guided MCQ Practice

MonopolyOligopoly MonopolisticPerfect CompetitionCompetition 1. No. of sellers 2. No. of buyers 3. Products nature 4. Ease of entry 5. Information availability One Many ForbiddenRestricted Free entry Perfect Information Many Imperfect Free entry HeterogeneousHomogeneous A few dominant sellers Many Heterogeneous / homogeneous