3.1.5 Competitive and concentrated markets
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34 Terms
Barriers to Entry
Restrictions that will block potential entrants from entering a market profitably
Sunk Costs
Costs that cannot be recovered if a business decides to leave an industry
Monopoly
An enterprise that is the only seller of a good or service
Oligopoly
When a few large firms have significant control over a given market
Competitve
When lots of small firms have no significant control over a market
Large number of buyers/ sellers
Sellers have to accept market price
Low barriers to entry
Similar products
Non-price competition
A competitive market
Advantages to consumers of a competitive market
Lower prices, more choice
Disadvantage to consumers of a competitive market
Less variety
Advantages to firms of a competitive market
Low barriers to entry
Disadvantages to firms of a competitive market
No market power, no brand loyalty
Advantages to workers of a competitive market
High demand for labour, job mobility
Disadvantages to workers of a competitive market
Low wages, job insecurity
Dominated by a single seller
Sellers control market price
High price discrimination
High barriers to entry
High product differentiation
A monopoly market
Price discrimination
Charging different prices to different markets for the same g/s
Advantages for consumers in monopoly markets
Better quality, innovation
Disadvantages for consumers in monopoly markets
Higher prices, less options
Advantages for firms in monopoly markets
Control over prices, inelastic PED
Disadvantage for firms in monopoly markets
High barriers to entry
Advantages for workers in monopoly markets
Job security, higher wages
Disadvantages for workers in monopoly markets
Union challenges
Market dominated by a few firms
High interdependence between firms
Non-price competition
High barriers to entry
High price discrimination
Differentiated products
An oligopoly market
Collision
Firms agree to set similar high prices and not compete
3 factors that influence supply of labour
Education/training, size of working population, migration
3 factors that influence demand for labour
Derived demand, cost of capital, state of economy
What is the x axis on a labour market diagram
Quantity of labour
What is the y axis on a labour market diagram
Wage rate
What happens if wages are set above equilibrium
Unemployment
3 Reasons for wage differentials within occupations
Experience, qualifications, responsibility
3 Reasons for wage differentials between occupations
Working conditions, skills required, derived demand
3 reasons why wages don’t fall
Minimum wage, trade unions, contract law
3 Methods of Payment
Bonuses, tips, commission
3 Deductions from pay
Income tax, pension contributions, national insurance
Gross pay
Total earnings before taxes
Net pay formula
Gross Pay - Total Deductions