Presentation on theme: "Market Structures and Current Changes"— Presentation transcript:
1 Market Structures and Current Changes Unit 7 Chapter 7 (Economics Textbook) Chapter 26/ Section 3 (Civics Textbook)Market Structures and Current Changes
2 What is a market Structure? These are ways the economy of a country is run through businesses, government control, competition and prices.There are 4 specific market structures and more than 1 market structure can exist in a country.Perfect competitionMonopoliesOligopoliesMonopolistic Competition
3 Perfect Competition 4 conditions Many buyers and sellers participate & accept price.Sellers offer same/ similar product.Buyers & sellers are well informed about product.Sellers are able to easily & freely enter and exist market.
4 Perfect Competition Characteristics: Allows many businesses to produce the same or similar productsHas no influence on price (equal), because produce at low levels.Consumer does not care where they get the commodity from.Buy based on best deal or lower price.Provides buyer with full information about a product & price.
5 Perfect Competition Characteristics: Allowed to enter business when there is money to be made, and then leave when money decreases.More business, brings more competition and therefore lower prices.Barriers of Entry do not exist because then it would cause and imperfect competition.Common barriers: skilled/ experienced personnel, technology & start-up cost
6 Perfect Competition Characteristics: EfficientCompetition keeps prices & production low.Prices represent the opportunity cost of each product.
7 Monopoly Characteristics: Allows only 1 seller of a product with multiple buyers.Exist because of barriers of entry have formedCauses specific problems, therefore is illegal in the USA.Takes advantage of marketCharges high prices
8 Monopoly Characteristics: Set prices as high as consumer will pay.Contribute to price discrimination, to better their sales & profitsDo this through market powerFound everywhere, except in perfect competitions markets.Use is legal, but businesses are just know to use to drive out competition.
9 How can Price discrimination properly work? Market PowerNo high competition, so prices can be controlledDistinct Customer GroupDivide customers, by price sensitivityDifficult ResaleMore product is consumed,less likely to sell used.
10 How markets get around price discrimination? Offer discount to consumers who will not pay the high prices.Effect: Usually charge higher prices to people that need it the most.Offer manufacture rebatesOffer Senior & student discountsOffer FREE Promotions
11 Monopoly Characteristics: Forms Economies of ScaleProducers cost is low, as production increases. (causes low prices)If limited cost & production will increase. (Cause high prices)Rarely achieved because production becomes more efficient with increased production.Can form into a Natural Monopoly
12 Monopoly Characteristics: Natural MonopoliesWorks best with 1 large business providing all the output.2 or more businesses lower prices & quantities, to where multiple businesses cannot last.Allowed so resources are not wastedGovernment controls prices & servicesCan be replaced by technology
13 Monopoly Characteristics: Government MonopolyGovernment regulates and creates barriers of entry.Controls Industrial OrganizationsAllows the businesses within the industry, to restrict the number of businesses in the marketCauses high prices, because supply is limitedHelps form technological monopolies
14 Monopoly Characteristics: Technological MonopoliesFormed by patentsGain profit from research without competitionFranchiseKeeps small markets under controlLicense
15 Monopolistic Competition 4 ConditionsMany businesses, with easy start-up costFew barriers of entrySimilar products or no patentsMany competitorsSlight control over priceMost control is in the hands of the consumerDifferentiation ProductsControl over price is based on quality of product vs. other products.
16 Monopolistic Competition Characteristics: Many Businesses sell similar productsSimilar to perfect competition, but substitutes are created in most everyday life goods & servicesOffer many varieties & therefore production cost are high and resources are not used efficiently.
17 Monopolistic Competition Characteristics: Nonprice CompetitionPhysical CharacteristicsLocationService LevelAdvertising/ Image/ Status
18 Monopolistic Competition Characteristics: Price is high compared to perfect competition, but does not exceed monopolies.Keep where consumers will still pay & obtain substitutesProduction & price stay fairly equalProfit is earned just enough to cover cost because of competition & substitutes.
19 Oligopoly Characteristics: Imperfect form of a monopoly, because it has a few businesses.Businesses have high prices and low production, because they work together as a team.Government licenses & patents, high start-up cost, nonprice competition & economies of scale will form barriers of entry
20 Oligopoly Characteristics: Factors are legal ways to cheat and control competition Try to undertake price leadership to set pricesSometimes end in price wars & then will form collusionCollusion form price fixingIllegal in USACartelsIllegal in USA & usually do not lastOnly survive if agree on price & production for profits to be evenUsually cheat & increase quota that lowers pricesCollapse if 1 groups is left out.
21 Economic Markets in Transition Main reason why countries transfer to a mixed economy is because of it’s success & prosperity.
22 Economic Markets in Transition Problems with other economiesControlled by 1 groupMistakes are commonLate arrival of suppliesToo much/ little of goods producedNot delivered to correct locationsProcess complicatedLimited access to goods because low levels of trade.
23 Economic Markets in Transition Current Problems facing transitions: Trade makes items cheaper & harder to compete with.Unemployment is highGetting used to/ forming stock markets, private ownership of factories, and letting supply/ demand determine price.High population rate (developing countries) above the GDPLand locked countries and no access to water trade routes.Lack of Natural ResourcesProblems left over from warDestroyed infrastructure, death, etc.Severe DebtBorrowed money to spur economic growth and now facing difficulty paying them offCorruption
24 Economic Markets in Transition Ways countries help countries in transition Globally.Some try to overcome on own & we respect wishesInternational Monetary Fund (IMF)Give advice & financial assistance (monetary/ fiscal policy)World BankGives loans & advice to countries trying to improve economyIn total both organization have 127 billion in outstanding loans.