Market structure Different markets have different characteristics but why would most of them stop the perfect market from forming? Choose three characteristics that do this. Chapter 46

Breaking the question down 1/3 - what’s in the perfect market? Different markets have different characteristics but why would most of them stop the perfect market from forming? Choose at least three characteristics that do this. Breaking the question down 1/3 - what’s in the perfect market? Can you tell me?

Breaking the question down 2/3– key ideas Different markets have different characteristics but why would most of them stop the perfect market from forming? Choose three characteristics that do this. Structures are characteristics of a market that influence or determine firms’ decision in that market – can you think of any examples? Market structure is on a continuum from Monopoly at one end and the Perfect Market at the other…….what’s in between? Mostly, barriers to entry (and there are many) are the main culprits in stopping markets from being (nearly) perfect in the real world. Industries, even when they produce the same good (e.g. smartphone) usually end up producing non-homogenous goods but pseudo-homogenous and take part in non-price competition. Perfect knowledge is almost impossible to realise but there have been/ are examples out there where almost perfect knowledge might be achieved – can you think of any examples? Firms are usually either interdependent or, rarely, independent.

Breaking the question down 3/3– key ideas What gives markets structure? Number of firms and their size From monopoly, imperfect competition, mon comp, oligopoly, perf comp Market concentration……concentration ratio (market share) Potential entry options – high/low barriers Capital costs / sunk costs / scale economies /natural cost advantages / legal barriers / marketing barriers / limit & predatory pricing / anti-competitive practices Barriers to exit Similar products in markets sold (homogeneity)……not always exact Product differentiation Level of asymmetric information Interdependence The answers to these gives the ‘structure’ and one could argue that any one, or in reality, a multitude of these characteristics stop/impede or restrict the ability for any market to be perfectly competitive

Plan it out Different markets have different characteristics but why would most of them stop the perfect market from forming? Choose three characteristics that do this. Combine all of this information to tackle the question and plan out a strategy to answer it….. Actually plan it out in lesson on the showbie PDF pro-forma in our classroom Homework – do it!....please.