Types of Market structures
But they all do not sell homogeneous products. The products are similar but all sellers sell slightly differentiated products. Now the consumers have the preference of choosing one product over another. The sellers can also charge a marginally higher price since they may enjoy some market power.
So the sellers become the price setters to a certain extent. For example, the market for cereals is a monopolistic competition.
1. Perfect Competition Market Structure
The products are all similar but slightly differentiated in terms of taste and flavours. Another such example is toothpaste. In an oligopoly , there are only a few firms in the market. While there is no clarity about the number of firms, dominant firms are considered the norm. So in the case of an oligopoly, the buyers are far greater than the sellers. The firms in this case either compete with another to collaborate together, They use their market influence to set the prices and in turn maximize their profits. So the consumers become the price takers.
4 Market Structures in Economics + Examples (updated)
In an oligopoly, there are various barriers to entry in the market, and new firms find it difficult to establish themselves. In a monopoly type of market structure, there is only one seller, so a single firm will control the entire market. It can set any price it wishes since it has all the market power. Consumers do not have any alternative and must pay the price set by the seller.
Monopolies are extremely undesirable. Here the consumer loose all their power and market forces become irrelevant. I chose this site for affordable prices and excellent support. If you need cheap, quick and professional writing, I definitely recommend Homeworkfor. I got two As and a B with them without a single revision! People come to us to get assistance with their academic tasks and get just that. It does not matter to us, whether you are too busy at work, concentrating on a passion project, or simply tired of a seemingly infinite flow of assignments.
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Chamberlain on Product Differentiation, Market Structure and Competition: An essay
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There is, of course, a limit on the number of pages even our best writers can produce with a pressing deadline, but as a rule, we manage to satisfy all the clients seeking urgent help. It is a common practice to charge more for such immediate papers, and our company is not an exception. Traditionally, the most important features of market structure are: The number of firms including the scale and extent of foreign competition The market share of the largest firms measured by the concentration ratio — see below The nature of costs including the potential for firms to exploit economies of scale and also the presence of sunk costs which affects market contestability in the long term The degree to which the industry is verti cally integrated - vertical integration explains the process by which different stages in production and distribution of a product are under the ownership and control of a single enterprise.
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A good example of vertical integration is the oil industry, where the major oil companies own the rights to extract from oilfields, they run a fleet of tankers, operate refineries and have control of sales at their own filling stations. The extent of product differentiation which affects cross-price elasticity of demand The structure of buyers in the industry including the possibility of monopsony power The turnover of customers sometimes known as "market churn" — i.
The rate of customer churn is affected by the degree of consumer or brand loyalty and the influence of persuasive advertising and marketing. Subscribe to email updates from tutor2u Economics Join s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning. You're now subscribed to receive email updates! Print page. Related Collections. Monopoly Power Collections.
Monopsony Power Product Markets Collections. Oligopoly Collections. You might also like. Advantages and Disadvantages of Monopoly Power Student videos. Advantages and Disadvantages of Oligopoly Student videos. Exam Answer: Water Nationalisation Exam technique advice. Competition and Contestability Student videos. Barriers to Entry and Exit Study notes.
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