Learning focus Concept of the market structure; Perfect and imperfect competition; Identify monopoly, oligopoly and monopolistic competition with examples.

Learning focusLearning 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” ?

What is a “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 在商店內購物

Definition Definition of market of market structure 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 TourConcept Tour

Perfect Competition完 全 競 爭

Monopoly壟 斷

Oligopoly寡 頭 壟 斷

Monopolistic Competition壟 斷 性 競 爭

Imperfect Competition不 完 全 競 爭

Market Structure 市 場 結 構

Market 市 場

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 Products3. 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 toPerfectly Competitive Market

Exit!!Entry!!

Perfect Market Information

• Buyers & Sellers know all market information about goods e.g.

Price Quality Quantity

Example:

• The stock exchange is a close (but not) example

Imperfect competitionImperfect 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 market2. No close substitute3. Highly Difficult (even impossible) to

Entry4. 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 Does a monopolist face competition?(P.247)competition?(P.247)

• Real World Example

Why do monopolies Why do monopolies exist?exist? (P.249) (P.249)

• Real World Example NM• Real World Example GO• Real World Example I• Real World Example P

Features:1. A Few Dominant Sellers2. Entry is Restricted3. 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 MarketEntry?

Examples

Examples of oligopoliesExamples of oligopolies (P.253)(P.253)

• Guided Essay Class Work Practice

Monopolistic Monopolistic competitioncompetition (P.256) (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 Practice• Rice is an example

• Multimedia Showroom • Guided MCQ Practice

Monopoly Oligopoly Monopolistic Perfect

Competition Competition

1. No. of sellers

2. No. of buyers

3. Products nature

4. Ease of entry

5. Information availability

One

Many

Forbidden Restricted

RestrictedRestricted

Free entry

Perfect Information

Many Many Many

Imperfect

Free entry

Heterogeneous Homogeneous

A few dominant sellers

Many Many

Heterogeneous / homogeneous

Heterogeneous / homogeneous