4.1 Micro Flashcards
What are the 5 types of market structures?
Monopoly Duopoly Oligopoly Monopolistic Competition Perfect Competition
What is perfect competition?
Large number of producers and no barriers to entry
Small in size
Price takers
What elasticity is demand in a competitive market?
Elastic
D=AR
What is imperfect competition?
Inhibits some but not all characteristics of perfect competition
What are the difference between perfect and imperfect competition?
Less firms in the market Some product differentiation Some barriers to entry and exit Demand is downward sloping Price can be influenced by suppliers
How does a monopoly occur?
When one firm dominates the market
How does a duopoly occur?
When a few firms dominate the market
How does monopolistic competition occur?
When there are many firms in the market but there is some form of product differentiation
What are monopolies?
Price leaders
Use promotion to persuade consumers
They can increase sales revenue by increasing market size
What is the market share for a monopoly?
25% or more
What are the barriers to entry in a monopoly?
High costs to enter
EOS e.g. bulk buying
Legal barriers
When does a duopoly exist?
When there are two firms dominate the market
Can also exploit like monopolies
Similar barriers to entry like monopolies
Non-price competition e.g. promotion
What are duopolies often accused for?
Collusion
What is an oligopoly?
When a few firms dominate the market
Some barriers to entry
Non-price competition
Unlikely to lower price
What are the characteristics of an oligopoly?
Do not tend to compete on price in the long term
May compete on price as a short term tactic
Tend to spend heavily on new product development
Branding is crucial and expensive marketing budgets are available
Firms must ensure that their products are accessible if they are going to be successful
