3.12 Market Structures

IGCSE 3.8

Why do firms compete?

>  ↑c__ base
> ↑s__
>  ↑m__ share
>  ↑brand __/reputation
>  ↑product/service q__

customer, sales, market, image, quality

Competition

> Encourages i__ & best use of s__ resources
>>As producing at lowest cost = max profit

> Consumers get ↑q__ products, ↓prices etc
> Restrictions in comp. = resources not a__ in the most __ way
>> = ↑costs/prices = ↓customers satisfied

> Lack of innovation = ↓quality products & ↓c__

innovation, scarce, quality, allocated, efficient, choices

Price competition

competing based off prices

Non-price competition

competing on other factors

Perfect competition

no firm can influence working of market

Characteristics of Perfect Competition
> P__ t__: incr. price = lose customers
> __ # of s__ firms, makes p__ s__ (homogeneous)
> No b__ to __
> __(elastic/inelastic) demand
> b__ i__ & product differentiation is crucial

price takers, large, small, perfect subs, barriers to entry, elastic, brand image

Imperfect competition has price __

makers

Imperfect Comp: Monopolistic Competition
> large # of __ firms selling goods/services close s__ to comp
> w__ b__ to __, so comp is strong

smaller, subs, weak barriers to entry

Imperfect Comp: Oligopoly
> s__ # of __ firms selling goods/services close s__ to comp
> price __ bc limited comp
> __(strong/weak) barriers to e__ bc h__ set up costs

small, large, subs, makers, strong, entry, high

Imperfect Comp: Duopoly
> smallest form of o__ w/ only __ firms

oligopoly, 2

Imperfect Comp: Monopoly
> __ seller of good/service w/ no d__ s__
> price __ bc complete control over s__
> __(significant/weak) barriers to entry

1, direct subs, maker, supply, significant

Monopoly Advantages
> operate on __ scale = _o_ = more products @ low prices
> can i__ in innovation (R&D) = higher q__ products
> eliminate w__ comp e.g. many private sector

large, EoS, invest, quality, wasteful

Monopoly Disadvantages
> l__ consumer __ & product q__ bc no s__ = less i__
> low o__, high prices bc supply can be r__ to raise price
> i__ use of resources (no comp)
> need for regulating c__ (group of firms working to dominate market)
> __(elastic/inelastic) demand; price __

less, choice, quality, subs, innovation, output, restricted, inefficient, cartels, inelastic, makers

Imperfect Comp: Monopsony
> many s__ in a market, __ buyer

sellers, 1

Define barriers to entry

factors preventing new firms from entering market

Barriers to Entry: Natural Barriers
> _o_: lower avg costs unlike s__ firms
> c__ size: i__ needed to enter market too h__ for new firms
> h__: being first in market = brand l__
> l__ considerations: govt introduces long & complex r__ making it hard to enter market e.g. medicine

EoS, smaller, capital, investment, high, history, loyalty, legal, rules

Barriers to Entry: Artificial Barriers
> R__on supplies: existing firm t__ supplier with business if they supply o__
> P__ pricing: firm offers low-cost products at a l__ = force out comp.
> E__ dealing: monopoly has a__ to prevent r__ from stocking r__
>>> Effective if brand is p__ & retailers have too much to l__ if agreement refused
> F__ l__ forcing: monopoly refuses to supply r__ unless their f__ range is stocked

restriction, threatens, others, predatory, loss, exclusive, agreement, retailers, rivals, popular, lose, full line, retailer, full