Vocabulary Monopoly- When a market is dominated by a single producer. Anti-Trust Laws- Designed by the US Gov’t in order to prevent monopolies. Vertical Merger- When a company buys out another company that was formally its supplier. Horizontal Merger- Merging of 2 firms that make the same products.

review SUMMARIZE THE LAW OF SUPPLY AND DEMAND. WHAT IS THE EQUILIBRIUM PRICE? WHAT ARE SOME OF THE INFLUENCES ON SUPPLY AND DEMAND? HOW DOES COMPETITION IMPACT SUPPLY AND DEMAND? SUMMARIZE DIFFERENCE B/W SUBSTITUTE GOODS AND COMPLIMENTARY GOODS WHAT FACTORS AFFECT PRICES? WHAT IS THE DIFFERENCE BETWEE N INFLATION AND DEFLATION? HOW DO INTEREST RATES IMPACT PRICES? HOW DOES THE GOVERNMENT IMPACT PRICES?

EQ: WHY IS COMPETITION GOOD FOR CONSUMERS?

WARM UP What is a monopoly? – When there is only 1 producer of a good and no other substitutes

1.Dana’s company has produced a large number of pink rubber shoes. However, the demand for the shoes is drastically less than the current supply. Which of the following situations does Dana find herself in? A.She needs to raise prices to make up the difference between supply and demand. B.She needs to cut prices b/c she is experiencing a surplus. C.She need to cut prices b/c she is experiencing a shortage. D.She needs to raise prices b/c she is experiencing a surplus.

Market Systems

Market system – When buyers and sellers come together to exchange things of value. In a perfectly competitive market, there must be: – A large number of buyers and sellers. – The same quality and type of products. – No major barriers to entering market. – Price runs the market – Ex: Farm Products

Monopolistic Competition – Firms compete on a variety of levels – Substitutes exist but are not exactly the same Restaurants: Have unique menus and food items, but substitutes exist

Monopoly – When there is only one producer of a given good/service and there are no adequate substitutes. One company supplying electricity or making cars Utilities Usually charge higher prices, produce less, and provide less quality than a competitive market.

Oligopoly – A market in which there are only a few producers. Cell phones, soft drinks, hospitals Operate between perfect competition and monopoly – They can affect the price of a product but must also observe the actions of competitors Easy to conspire with competitors – Laws prevent these actions

Conglomerates & Mergers Conglomerate – Large companies that consist of several businesses, many of which may be unrelated in what they produce. GE owning NBC; Disney owning ESPN & ABC The process of combining firms is called a merger Vertical merger – When a company buys out another company that was previously its supplier. Ford buying out Firestone Tires Horizontal merger – Merging of two firms that make the same products. In 1998, BP bought out the American Oil Company (Amaco) Multinational conglomerate – Conglomerate with companies in more than one country. British Petroleum (BP)

Anti-Trust Laws Monopolies prevent a competitive market To ensure competition the US Government began passing Anti-Trust Laws in the late 1800’s – These laws prohibit monopolies – Courts have used these laws to break-up monopolies in tobacco, oil, railroads, etc.

GRAPHIC ORGANIZER

EQ: WHY IS COMPETITION GOOD FOR CONSUMERS?

Reflection Explain how American Anti-Trust Laws are an example of a mixed-market economy? Create a spectrum or continuum showing the levels of competition in a free market, monopoly, monopolistic competition and oligopoly Compare and Contrast a horizontal and vertical merger? Evaluate the role competition plays in regulating quality and price Describe characteristics of a competitive market

Closing? How are American Anti-Trust Laws an example of a mixed-market economy? – The laws are an example of government involvement in the economy. A pure market economy has no government involvement.