Sit Hung, Winnie (s980427) Law Chi Hang, Jarvis (s981093) Chei Wing Yee, Aggie (s981747) Group 10 [ Major: Economics ]

Concept Tour

What is a “MARKET” ?

“MARKET” ? In Economics, a Market is defined as a context in which exchange of goods and services between sellers and buyers takes place. A Market exists whenever a transaction is made.

Four features: 1. Large No. of Buyers & Sellers 2. Homogeneous Products 3. Free Entry & Exit 4. Perfect Market Information

Large No. of Buyers & Sellers the action of an individual buyer or seller is unable to affect the market price Buyers Sellers

Homogeneous Products the products in the market must be identical in the eyes of consumers

Free Entry and Exit Firms are free to entry or leave the market Welcome to Perfectly Competitive Market Exit!! Entry!!

Perfect Market Information Buyers & Sellers know all market information about goods e.g. PriceQuality Q uantity

Example: The stock exchange is a close example

Four Features: 1. Large No. of Buyers & Sellers 2. Differentiated Products 3. Free Entry & Exit 4. Imperfect Market Information Same as P.C. Same as P.C.

Product Differentiation A firm can use product differentiation to promote sales. Techniques are: new designs advertising branding

Imperfect Information of the Market Sellers & Buyers don’t have perfect info. on price & quality of goods

Example: Rice is an example

Four features: 1. A Few Dominant Sellers 2. Similar but Differentiated Products 3. Entry is Restricted 4. Imperfect Market Information Same as P.C. & M.C.

Few dominant sellers Oligopolies has to consider the reactions of other firms before making any decision price rigidity price leadership non-price competition Market behavior:

Similar but Differentiate Products the products are close substitutes to one another

Entry is Restricted it is difficult because of government regulation/huge capital/technological requirements Imperfectly Competitive Market Entry?

Examples

Same as M.C. & O. Four Features: 1. Only One seller in the whole market 2. No close subsitiute 3. Highly Difficult (even impossible) to Entry 4. Imperfect (highly restricted) Market Information

Only One Seller in the Whole Market buyers can obtain the goods or services from monopoly only

No Close Substitutes buyers are difficult to find another goods to satisfy the same want

Highly Difficult (even impossible) to entry it is because of monopoly power Sources of Monopoly Power government ownership government franchise ownership of important resources huge capital requirement economies of scale No Entry!!

Examples

MonopolyOligopoly MonopolisticPerfect CompetitionCompetition 1. No. of sellers 2. No. of buyers 3. Products nature 4. Ease of entry 5. Information availability One Many No close substitute ForbiddenRestricted Easy to enter Perfect Information Many Easy to obtain Free entry Heterogeneous Homogeneous A few dominant sellers Many