4 Types of Market Structures that for Business Competition

1) PURE COMPETITION

Conditions for Pure Competition Condition 1: Many buyers and sellers.

Conditions for Pure Competition Condition 2: Sellers offer identical products.

Conditions for Pure Competition Condition 3: Buyers and sellers are well-informed about items for sale.

Conditions for Pure Competition Condition 4: Sellers are free to enter the market.

Pure competition relies on Non- Price Competition. This means they don’t rely on price when buying. Instead, they look at things like: 1.Physical characteristics 2.Location 3.Service level 4.Advertising, image, or status

2) Monopolistic Competition vs.

Monopolistic Competition Condition 1: Many sellers.

Monopolistic Competition Condition 2: Sellers offer different products, but they are similar.

Monopolistic Competition Condition 3: Sellers have some control over their prices.

Product Differentiation When a business makes a product different from other similar products

Product Differentiation

3) Oligopoly A market situation in which a few large sellers of a product dominate.

Oligopoly 1.A few sellers in the market dominate = less competition 2.Some variety of goods 3.Some control of price 3 Conditions:

4) Monopoly A market situation with only one seller of a particular product controls the market for that product.

Monopoly 1.One seller 2.No variety of products 3.Sellers have total control of their prices 3 Conditions

Four types of Monopoly Natural – a situation where costs are minimized by having a single producer

Four types of Monopoly Geographic – When an area is too small to support two or more businesses.

Four types of Monopoly Technological – When a business discovers or invents something entirely new

Four types of Monopoly Government – when a business is owned and operated by the government

The business cycle is the recurring ups and downs of the economy.

Business Cycle Peak – the best Recession – decrease for six months Trough – the worst Expansion – improving

If a recession is very severe it may turn into a depression. The U.S. has experienced only one of these in the 1930’s.

The Consumer Price Index (CPI) is used to measure price changes over a period of time to measure the economy.

Inflation vs. Deflation Inflation – rise in the general price level. As years go by, prices generally rise. Deflation – decrease in the general price level. Only time this happened was during Great Depression.