1. 1 Essential Question: Identify the two types of highly competitive markets, describe the four conditions required for Perfect competition and explain why it doesn’t exist, Define the goal of monopolistic competition, and describe the ways that sellers attempt to achieve a monopoly Highly Competitive Markets SECTION 1

2. 2 Two types of highly competitive markets Perfect (pure) competition is a market structure in which buyers and sellers each compete directly and completely under the laws of supply and demand making the same products. Monopolistic competition is different as producers attempt to make different products than their competition or make similar products SEEM different. Highly Competitive Markets SECTION 1

3. 3 4 Conditions for Perfect Competition Many Independent Buyers and Sellers Sellers offer Identical Products Buyers are well informed about products Sellers can enter/exit market easily Highly Competitive Markets SECTION 1

4. 4 Perfect Competition vs. Monopolistic Problem with Perfect Competition? IT DOESN’T EXIST!!! Sellers are greedy and want to increase the number of buyers in order to make more profit. Buyers want the best products at the lowest possible price In order to satisfy both, sellers attempt to make different products than their competitors OR make similar products appear to be different Highly Competitive Markets SECTION 1

5. 5 The Goal of Monopolistic competition Eliminate your competition and create a market structure known as a monopoly A monopoly is a market structure with only one seller. In order to do this, sellers must take buyers away from their competitors through a variety of ways: Non-price competition, differentiation, and advertising. Highly Competitive Markets SECTION 1

6. 6 Sellers competing Sellers of similar product know that price is usually the biggest factor in a buyers decision. Since lowering prices means lowering profits, sellers differentiate their products from one another by advertising and focusing on the differences (real or implied) Highly Competitive Markets SECTION 1

7. 7 Non-Price Competition In order to gain more customers, while maintaining a profitable price, consumer practice Non-Price Competition such as Commercial Advertising to increase their market share. Highly Competitive Markets SECTION 1