Competitive and concentrated markets

MARKET STRUCTURE

The characteristics of a market which determine a firms behaviour within a market

CONCENTRATION OF FIRMS IN AN INDUSTRY

The proportion of the industry that each business holds and the number of sales they are responsible for

PRICE TAKER

A firm that passively accepts the set market price as it is determines by market conditions outside of the firms control

PRICE MAKER

A firm that has the power to set prices within a market

HOMOGENOUS GOODS

Goods which are identical

DIFFERENTIATED GOODS

Goods which occur when firms have more control over what the produce

PERFECT KNOWLEDGE

When information about prices, outputs and products are readily available to both buyers and sellers

IMPERFECT KNOWLEDGE

When some firms/ consumers have more knowledge that others in a market

INDEPENDENT RELATIONSHIP

When the actions of one firm have no significant impact on another firm

INTERDEPENDENT RELATIONSHIP

When the actions of one firm will have an effect on another firm

BARRIERS TO ENTRY

Things that make it difficult for new firms to enter a market

PREDATORY PRICING

Lowering costs in order to undercut another business (however this is illegal)

TOTAL REVENUE

The total money received from the dale of a firms goods and services. Can also refer to the total money received from the sale of one good or service

AVERAGE REVENUE

The average receipt of money for each good or service that is sold

NORMAL PROFIT

The minimum amount required to keep a factor employed in its present activity in the long run. Occurs when total revenue = total cost and this covers the opportunity cost of all factors of production used

SUPERNORMAL/ ABNORMAL PROFIT

The return above Normal profit

PERFECT COMPETITION

A form of market structure that produces allocative and productive efficiency in long run equilibrium

PURE MONOPOLY

When there is only one firm in a market

LEGAL/ WORKING MONOPOLY

A market dominated by one firm (more than 25%)

NATURAL MONOPOLY

A market where there are no substitutes and where another firm in the industry would be inefficient and a duplication would be unnecessary and wasteful