Upload
sandrea-butcher
View
69
Download
3
Embed Size (px)
Citation preview
CHARACTERISTICS OF MARKET STRUCTURESPrepared by Sandrea Butcher
• Recall that market structure refers to the characteristics that determine how the firms in an industry behave.• These characteristics include:• Number of firms in an industry• Type of product• Control over price• Freedom of entry and exit
NUMBER OF FIRMS IN AN INDUSTRY
• This can range from a large number of firms, to a few, or even one firm.
I’ll just get rid of the
competition!
TYPE OF PRODUCT
• Products can either be standardized or differentiated.
• With a standardized (or homogeneous) product there is no variety.
• Differentiated products have differences which are physical or perceived.
• At the supermarket you have many different brands of toothpaste selling as follows:• Whitening• Tartar control• Sensitive teeth• Baking soda• Anti-gingivitis• Natural• Children
CONTROL OVER PRICE
• Firms have varying control over price.
• Some accept the price set by the market, because if they attempt to increase the price, consumers will shop elsewhere.
These are too expensive. I
will try further up the street.
• Other firms have some control over price because the product is different to others on the market.
FREEDOM OF ENTRY AND EXIT
• Some industries may have heavy barriers to entry making them less competitive while other industries may have little to no barriers to entry.
• Barriers include:• Control of raw materials – If you do
not own a quarry you cannot provide building sand.
• Licenses – Governments issues licenses to operate television stations in the Caribbean
Walkers Sand Quarry, Barbados
• High set up costs – Due to the nature of some business operations, heavy equipment is required and high set up costs
• Some industries have weak barriers to entry.
• This is why there are so many firms operating.