3.1.5-Competitive and concentrated markets Flashcards
What is a closed economy?
An economy where goods and services are provided only by the public sector
What does diversified mean?
When firms expand into different industries
What are market structures?
How markets operate to enable buyers and sellers to come together
What is a merger?
Where 2 or more companies join together
What is a mixed economy?
An economy where goods and services are provided by both the public and private sector
What is a multinational company (MNC)
A company that has outlets or production facilities in more than one country. Usually plc’s-public limited company
What are nationalised industries?
Public corporations previously part of the private sector
What is an open economy?
An economy where goods and services are provided by only the private sector
What is product differentiation?
How firms make a good or service different to those of its competitors
What is aquisition?
When one firm takes over another but controlling more than 50% of it
What are barriers to entry?
Obstacles which might discourage or prevent firms from entering the market, both visible and invisible
What are competitive markets?
Market structures where there is a potential competition between producers
What is a cartel?
Where small groups of large firms work together to keep prices high and therefore keep all their profits high-usually illegal
What is collusion?
Informal agreement between firms to restrict competition
What is a monopoly?
Where there is only one provider of a good or service
What is monopoly power?
When a firm owns at least 25% of the market share
What is an oligopoly?
Where a few dominant firms have a large share of a particular market
What is a patent?
A licence that allows the inventor to use it exclusively
What is a price maker?
The leading firm who sets the market price
What is a price taker?
A firm that sets their prices based on the price maker
What is price war?
One firm reduces their price and others follow
What is derived demand?
Demand that arises due to demand for another good or service
What is direct tax
Tax taken from your wage / salary
What is gross pay?
Total pay before deductions are taken off
What is income tax?
A progressional tax taken directly from your salary/wage
What is labour mobility?
The ease at which workers can move geographically and occupationally
What is national insurance contribution (NIC)
A direct proportional tax that is typically around 13% of income. It pays for public services like the NHS and state pensions
What is net pay?
Total pay after all deductions such as tax and national insurance are taken off
What are professionals?
People who have jobs that require post-graduate qualifications, e.g. doctor, teacher
What is progressive tax?
The more you earn the higher % you pay in tax
What is proportional tax?
Everyone pays the same % in tax
What is salary?
A fixed amount you receive each month usually expressed as a yearly amount
What are trade unions?
Organisations of workers that negotiate wages, working conditions and hours. Collective bargaining
What does value-added mean?
Value is added by work being done to it
What is wage?
The hourly rate for labour, often calculated weekly
What are dominant firms?
Firms that have a significant share of a particular market
What are characteristics of dominant firms?
- Often produce a particular type of branded product or service
- Usually in high demand
- Control prices
What are advantages of small firms?
- Flexibility
- Personal service
- Better communications
- Innovation
What are disadvantages of small firms?
- Higher costs
- Lack of finance
- Difficult to employ specialists
- Vulnerable
What are advantages of large firms?
- Market domination
- Economies of scale
- Large-scale contracts
What are disadvantages of large firms?
- Too bureaucratic
- Co-ordination and control
- Lack of motivation
What are the 4 types of market structures?
- Perfect competition
- Monopolistic competition
- Oligopolies
- Monopolies
What are the characteristics of perfect competition?
- Large number of firms in the market
- No individual producer has control over the price-price is set by the market
- Low barriers to entry
- Low differentiation
- Example-Polish Onion farmers
What are the characteristics of monopolistic competition?
- Large number of firms in the market
- Some control over prices
- Fairly low barriers to entry
- High differentiation
- Example-Restaurants
What are the characteristics of oligopolies?
- A few large firms in the market
- High price control
- High barriers to entry
- Example-Car manufacturers
What are the characteristics of a monopoly?
- One dominant firm in a market (at least 25% power)
- High price control
- Extremely high barriers to entry
- Example-Google
What are the 3 types of economies?
- Open
- Closed
- Mixed
Why does competition exist?
- To survive in a market
- Profit maximisation
- Increased market share
- Increased efficiency
What is price competition?
Where firms lower their prices in order to increase their customer base-this increases market share
What are examples of non-price competition?
- Convenient location
- Unique or specialised goods
- Quality
- Marketing/advertising
- Brands
How do competitive markets impact consumers?
- Lower prices
- More choice
- Higher quality
- Innovation
How do competitive markets impact producers?
- More customers-no monoposony
- Less profits
- Risky
How do competitive markets impact the government?
- If producers recieve lower profits it means that tax revenue isn’t as high for the government
How do non-competitive markets impact consumers?
- Higher prices
- Less choice
How do non-competitive markets impact producers?
- Large profits
- More funds to innovate
How do non-competitive markets impact the government?
- Larger taxation revenues for the government
Who supplies and demands labour?
Workers are the supply of labour and firms demand labour
What is the price of labour also called?
The wage rate
How are wages determined?
The interaction of demand and supply
Whar are factors that can cause the labour market to not operate perfectly?
- Workers unwilling to move
- Personal factors-such as family ties
- Information failure-people may be unaware of all possible job opportunities
How are workers paid?
Workers are paid a salary where their annual pay is divided into 12 equal parts and is paid monthly. Others are paid based on an hourly wage.
What are factors affecting the demand for labour? [6]
- The state of the economy
- Changing demand in a certain industry
- Wage rates
- Real wages
- Productivity of labour
- Profitability of firms
What are factors affecting the supply of labour?
- Wage rate
- Other money payments (such as overtime)
- Size of the working population
- Non-monetary factors
- Barriers to entry
- Educaion and training
