Market Structures
MARKET STRUCTURE
It is common to see similar products offered for sale at vastly different prices. For example, the price of a hotel room can vary from as low as £25 per night to several hundreds of pounds or more in the same city; the cost of gym membership will vary depending on the nature of the business organisation offering the service. An organisation’s ability to influence the price at which it sells its products is largely dependent upon the type of market in which it operates. The purpose of this session is to explore each of the main types of market structure and consider the differences between them.
There are 4 main types of market structure: * Perfect competition * Monopoly * Oligopoly * Monopolistic competition
There are two main differences between each of the above market types: 1. The amount of competition there exists between the organisations involved in the market. 2. The degree to which the organisation determines the price of the good or service it produces.
The way in which the amount of competition between one firm and its rivals changes depending on the type of market structure can be illustrated in the following way:
Perfect competition
Perfect competition
Monopolistic competition
Monopolistic competition
Oligopoly
Oligopoly
Monopoly
Monopoly
increasing competition increasing competition
Figure 1: market structure and competition
As Figure 1 shows, the amount of competition taking place increases as you move from left to right, with monopoly representing the least degree of competition and perfect competition the most.
It is worth looking at each of the four main types of market individually to understand their main features and examine more closely the differences between them.
Perfect competition
Perfect competition is a ‘theoretical’ and extreme type of market structure, rarely found in the real business world. The market (i.e. the combined actions of all the firms
It is common to see similar products offered for sale at vastly different prices. For example, the price of a hotel room can vary from as low as £25 per night to several hundreds of pounds or more in the same city; the cost of gym membership will vary depending on the nature of the business organisation offering the service. An organisation’s ability to influence the price at which it sells its products is largely dependent upon the type of market in which it operates. The purpose of this session is to explore each of the main types of market structure and consider the differences between them.
There are 4 main types of market structure: * Perfect competition * Monopoly * Oligopoly * Monopolistic competition
There are two main differences between each of the above market types: 1. The amount of competition there exists between the organisations involved in the market. 2. The degree to which the organisation determines the price of the good or service it produces.
The way in which the amount of competition between one firm and its rivals changes depending on the type of market structure can be illustrated in the following way:
Perfect competition
Perfect competition
Monopolistic competition
Monopolistic competition
Oligopoly
Oligopoly
Monopoly
Monopoly
increasing competition increasing competition
Figure 1: market structure and competition
As Figure 1 shows, the amount of competition taking place increases as you move from left to right, with monopoly representing the least degree of competition and perfect competition the most.
It is worth looking at each of the four main types of market individually to understand their main features and examine more closely the differences between them.
Perfect competition
Perfect competition is a ‘theoretical’ and extreme type of market structure, rarely found in the real business world. The market (i.e. the combined actions of all the firms
References: Clark, A. (2000) Organisations, Competition and the Business Environment. Financial Times Prentice Hall. Harlow, UK. Chapter 5. Ferguson, K. (2002) Essential Economics: A Guide for Business Students. Palgrave Macmillan. Basingstoke, UK. Chapters 7 & 8 Ison, S Tribe, J. (2005) The Economics of Recreation, Leisure and Tourism. Elsevier. Oxford, UK. Chapters 6 & 7 Worthington, I