Market Structures

Question 1

Define market structures

Answer 1

Market structures refers to how competitive market is. For example, supermarkets are fairly competitive, train companies are not very competitive, and hairdressers are very competitive.

Question 2

What are the two main factors that tend to influence how competitive market is?

Answer 2

1. The number of firms in the market. The more business, the more competition
2. How easy it is for new businesses to get into that market

Question 3

Barriers to entry - cost of setting up in that industry

Answer 3

For example the equipment, buildings, factories needed to create a product. The higher these costs are the more difficult.

Question 4

Barriers to entry - Size of existing firms in the market

Answer 4

If businesses tend to be very big, they can benefit from economies of scale, making it more difficult to enter the market.

Question 5

Barriers to entry - The degree of brand loyalty for existing products

Answer 5

Where people keep buying the same products. If brand loyalty is very strong this will make it harder for new businesses.

Question 6

What are the two main factors that influence brand loyalty?

Answer 6

• How establish the business is

- The amount businesses spend on advertising

Question 7

Barriers to entry - Legal factors

Answer 7

This means no other business can make that product. The more of these there are the more difficult it is for a company to enter the market

Question 8

Barriers to entry - The behaviour of existing firms

Answer 8

Existing firms may try to make it more difficult for new firms to enter the market. E.g., they could lower prices or increase advertisement.

Question 9

Barriers to entry - Exit costs

Answer 9

This refers to how much you would lose if you went into the industry do you had to close down.
These will mainly be influenced by:
-How much money you spend on machinery
-How specialist the equipment is (resell-able?)