Market Stucture

Question 1

COMPETITION

Answer 1

•Very few, if any, businesses operate without facing competition. It is not enough to understand what customers value. A business has to be able to deliver customer value better than the competition.
•The ability to do this is heavily influenced by the structure of the market in which a business operates. The more competitive a market is – the harder the task becomes.

Question 2

COMPETITION

Answer 2

•Very few, if any, businesses operate without facing competition. It is not enough to understand what customers value. A business has to be able to deliver customer value better than the competition.
•The ability to do this is heavily influenced by the structure of the market in which a business operates. The more competitive a market is – the harder the task becomes.

Question 3

MONOPOLY

Answer 3

Number of firms: one company
Type of product: unique product
Barriers to entry: a firm’s control over scarce natural resources, high capital requirements for an industry, economies of scale, network effects, legal barriers, and government backing.
Pricing power: to set prices as they wish
Choice for consumers: no choice but to buy from the company that controls the market,
Impact on business behaviour e.g. marketing: can dictate price changes and create barriers that prevent competitors from entering the marketplace.
Examples:
-google
- meta
- microsoft

Question 4

OLIGOPOLY

Answer 4

Number of firms: two or more
Type of product: homogeneous or differentiated products. A good example of an Oligopoly is the cold drinks industry.
Barriers to entry: economies of scale, regulatory barriers, accessing supply and distribution channels, capital requirements, and brand loyalty.
Pricing power: no single firm is able to raise its prices above the price that would exist under a perfect competition scenario.
Choice for consumers: can block new entrants, slow innovation, and increase prices, all of which harm consumers.
Impact on business behaviour e.g. marketing: limiting new entrants in the market and decreased innovation.
Examples: car industry, petrol retail, pharmaceutical industry, coffee shop retail, and airlines.

Question 5

MONOPOLISTIC COMPETITION

Answer 5

Number of firms: many
Type of product: dish soap or hamburgers
Barriers of entry: high startup costs or government regulations.
Pricing power: act as price makers and set prices for goods and services. Firms in monopolistic competition can raise or lower prices without inciting a price war,
Choice for consumers: When a monopolistic competitor raises its price, consumers can choose to buy a similar product from another firm.
Impact on business behaviour e.g. marketing: can lead to economic inefficiency, higher prices, and limited consumer choice, but also encourages innovation and product diversity.
Examples: Restaurants, hair salons, household items, and clothing

Question 6

PERFECT COMPETITION

Answer 6

Number of firms: infinite
Type of product: identical products
Barriers to entry: zero barriers to entry
Pricing Power: A perfectly competitive firm is a price taker, which means that it must accept the equilibrium price at which it sells goods.
Choice for consumers: consumers have lots of choice, meaning that if one firm increases their prices, the consumer will simply shop at another firm.
Impact on business behaviour e.g. marketing: If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales. Perfect competition occurs when there are many sellers, there is easy entry and exiting of firms, products are identical from one seller to another, and sellers are price takers.
Examples: An agricultural market made up of thousands of farmers comprises perfect competition that makes the market efficient. Another example is an auction where numerous people bid on the same product. This ensures that the perfect price is ultimately paid for the product.