Competitive and Concentrated markets

What are the 4 market structures?

• Monopoly

• Oligopoly

• Monopolistic competition

• Perfect Competition

What are the factors of Monopoly?

• One large firm, no competition

• Unique products, no subs

• Impossible to enter

• Business has complete control

• Price makers - Can set prices wherever they want

• An example would be train tracks/ National grid

What are the factors of an Oligopoly?

• Small number of large firms

• Little competition

• Identical or differentiated products

• High barriers to entry

• Firms are interdependent - Their decisions affect every other firm

• E.g Car manufacturers

What are the factors of Monopolistic competition?

• Large number of small firms

• Some competition

• Differentiated but substitutable products

• Low/no barriers to entry

• Firms have a small amount of power (Some influence on an increase in price)

• E.g tooth brushes

What are the factors of Perfect competition?

• Large number of small firms

• Lots of competition

• Identical products

• Free to enter/ no barriers to entry

• Firms have little to no power

• Price takers - no market power (Cant increase prices or they lose buyers)

• E.g Apples

What is a Competitive market?

A market that has many buyers and sellers.

What is needed for the market to work efficiently?

• Producers should face no barriers to entry

• Consumers should have perfect information

What is the economic impact of competition on consumers?

• More choice and lower prices

• Improved quality of products

• Could get poor quality products due to producers cutting costs

• Could have higher prices because of advertising costs

What is the economic impact of competition on producers?

• Have to be more efficient to reduce operation costs and keep prices low

• Can be encouraged to be innovative

• However, no market power so have to lower prices, reducing profits.

What is the economic impact of competition on the Government?

• Encourages competitive markets as it benefits consumers and drives economic growth.

• However as producers lower profits, tax revenue will be lower.

What is a Non-competitive market?

A market with a few firms.

What is a Monopoly?

When there’s only one seller

What is an Oligopoly?

When there’s just a few sellers.

What is the economic impact of a lack of competition on consumers?

• Higher prices

• Producers have less drive for high quality / innovative products

What is the economic impact of a lack of competition on producers?

• Businesses make large profits

• However less drive to be highly efficient

• More funds to innovate and improve quality

What is the economic impact of a lack of competition on the Government?

• Businesses have large profits = More tax revenue

What is the Labour market?

Where the supply of labour offered by households interacts with the demand for labour by firms. This gives us the price of labour (the wage rate).

How are wages determined?

• Free market economy - Interaction of demand and supply

• Reality - The government and trade unions exert influence on the actual wage level

What is Gross pay?

The wage you receive before any deductions are made.

What is Net pay?

The amount of money that you have after all deductions such as income tax have been made.