Market Structure & Prices Aim: How does the degree of competition impact the way prices are determined?

Aim: How does the degree of competition impact the way prices are determined? Do Now: COMPETITION! What does the word “competition” mean to you? What are some examples of competition you see among sellers of different goods when you make a purchase? Is competition among sellers of goods a good thing? Could competition among sellers be a bad thing?

Is it better to have competition? Think… Pair… Discuss… Read the advantages and disadvantages of competition and answer the questions below; Based on what you read, what is the greatest advantage of competition? What was the greatest disadvantage of competition mentioned in the handout? Is it better to have competition?

Different Market Structures Perfectly competitive markets Monopolistically competitive markets Oligopolies Monopolies

Perfect Competition Perfect competition is a model that does not actually exist in the real world. Perfect competition describes a market in which: The products sold are identical There are many buyers and sellers (who accept the market price) With perfect competition, consumers receive fair treatment because the price they pay for any good or service is equal to the cost paid to produce the good or deliver the service.

Monopolistic Competition Monopolistic competition describes a market in which: Is characterized by many sellers Sellers differentiate competitive products Because of the large number of sellers/firms, price fixing is difficult. Each seller is able to set a price, yet price-making power of a monopolistic competitive firm is small.

Oligopoly Oligopoly describes a market: Controlled by a small number of sellers who can control the supply of a good and its price. The actions of one firm significantly influence the other firms. There are huge barriers to entering an oligopolistic market. These barriers can involve large financial requirements, availability of raw materials, access to relevant technology, or patent rights.

Wireless carriers Airlines

Monopoly A monopoly is the opposite of perfect competition. In a monopoly: There is only one seller There is no competition! A monopoly does not need to attract costumers. There are many reasons why a monopoly exists; (1) if an inventor gets a patent for his product, (2) if a company owns the entire supply of a material needed to produce the product.

We don’t even remember what the Internet looked like before Google came onto the scene. Thanks to their secret algorithm, they control 67% of the web search market. Since its beginning, the company has grown and branched off into email, online maps, GPS tracking systems, online data storage and mobile phones.

–What are greatest advantages and disadvantages of monopolies to businesses and consumers? –What are the greatest advantages and disadvantages of monopolistic competition to businesses and consumers? –What are the greatest advantages and disadvantages of oligopolies to businesses and consumers?

Closure As consumers are we better off living under a more or less competitive market structure, or does it depend more on the product we are buying? Are small businesses better off operating under a more or less competitive market structure or does it depend more on the product they are selling?