1. Competition in a Free Market
Section 3.1
Nikki Bhupal
Oct 16,2009
Block A

2. What is a free market?
A free market is a society which allows business to make a profit
-North American countries are free markets
-Profit drives businesses to succeed.

3. Free market continued
A Canadian free market allows Canadians to hold a private property and do with them as they please (This means the government can’t take away or sell people’s property)
-Some use it to make products and to help make a profit
-others use it to re-sell at a higher price for a profit
A free market also not only allows competition but encourages it. Competition defines the structures of the market

4. Market Structures Four major market structures:
Perfect Competition -A market characterized by a large number of small companies, none of whom have an opportunity for market control. It requires government legislation to restrict growth.->No-one has control over pricing and no-one has control over the market.
Monopolistic Competition -A market consisting of a large number of companies, each having an opportunity for a degree of market control.

5. Market Structures Continued
Oligopoly -a market with a small number of large companies, each with a substantial amount of market control. Ex: Rogers, bell, and TELUS
Monopoly -a single company has market control. Ex: There is only one place to buy electricity- BC hydro)

6. Monopolies Why monopolies are not great for consumers…
Standard oil company, created by John D. Rockefeller
STANDARD OIL: was a American oil producing, transporting, refining, and marketing company established in 1870.
-It was broken up by the US supreme court in 1911 because it controlled 91% of the production and 85% of sales (mostly kerosene) which was exported around the world.

7. Monopolies continued
The Canadian government insists upon competition, therefore the government regulates monopolies.
-Ex: We will never see a West Jet& Air Canada merger
The government also legislates against trade practices that limit competition unfairly.
-EX: price fixing, restricted mergers, exclusive dealings.

8. The benefits of competition
There are benefits to individual consumers and our society as a whole…
Encourages the creation of new businesses -Good for society and individual consumer
Enables a wide selection of goods/services to consumers—good for individual consumer—consumers have a choice (due to a variety of offerings) encourages quality of products/services—good for society and individual consumer—holds businesses accountable.

9. Competition and Productivity
One way to compete is by charging less then the competition
-must be more efficient, use fewer resources, or make better deals with suppliers (buyers are HUGE here)
Another way is to develop something new (invention or innovation)
-R&D departments support technicians who work on new ideas
Improvements in R& D can cause turmoil in some industries
Ex. Video rental stores had to change inventories to DVD’S and VHS tape

10. Direct Vs Indirect Competition
Direct competition: products that are very similar are in direct competition for consumer dollars
Ex: BIG MAC AND WHOPPER
Indirect competition: Products that are NOT directly related to each other
Ex: BIG MAC AND FROZEN PIZZA.