Market Structure / Supply & Demand
Three types of Market Structure
Market structure can be described in terms of how much competition a seller has and the proportion of the market share they hold.
Monopoly – one person or company dominates provision of a particular product or service, in the absence of competitors. Consumers do not have a choice for provision of the product in question.
A monopoly can ‘call the shots’ on their product (price, availability etc.) as there is no alternative on offer to consumers.
Monopolists tend to produce a limited number of product which are then sold at a high price (there is no need to compete). (Control of demand)
The British Government seeks to restrict the behaviour of monopolies, so preventing unfair business behaviours.
Oligopoly – a small number of dominant firms or individuals compete to provide a product or service. Competition is limited and as a result, very closely related. Everything a competitor does directly affects your business. E.g. If one company drops its prices all the other businesses in the oligopoly are affected.
Business decisions must always consider competitor’s influence / reaction. An oligopoly may agree to maintain artificially high prices – technically illegal but difficult to prove if nothing is in writing.
Duopoly – taken literally a duopoly means 2 firms control a market. In reality is usually means that 2 firms dominate a market by having the biggest share in it.
Examples of duopolistic markets include Coca Cola and Pepsi as dominant suppliers of soft drinks. There are many competitors in the field but Coke and Pepsi have such a huge share of the market that they don’t usually see them as competition or influence on their business decisions.
Perfect competition – theoretical – as are all the above definitions.
Multiple providers offer a wide choice to a broad spectrum of consumers.
Consumers benefit from freedom of choice and businesses competing for their custom through competitive pricing and customer
Market structure can be described in terms of how much competition a seller has and the proportion of the market share they hold.
Monopoly – one person or company dominates provision of a particular product or service, in the absence of competitors. Consumers do not have a choice for provision of the product in question.
A monopoly can ‘call the shots’ on their product (price, availability etc.) as there is no alternative on offer to consumers.
Monopolists tend to produce a limited number of product which are then sold at a high price (there is no need to compete). (Control of demand)
The British Government seeks to restrict the behaviour of monopolies, so preventing unfair business behaviours.
Oligopoly – a small number of dominant firms or individuals compete to provide a product or service. Competition is limited and as a result, very closely related. Everything a competitor does directly affects your business. E.g. If one company drops its prices all the other businesses in the oligopoly are affected.
Business decisions must always consider competitor’s influence / reaction. An oligopoly may agree to maintain artificially high prices – technically illegal but difficult to prove if nothing is in writing.
Duopoly – taken literally a duopoly means 2 firms control a market. In reality is usually means that 2 firms dominate a market by having the biggest share in it.
Examples of duopolistic markets include Coca Cola and Pepsi as dominant suppliers of soft drinks. There are many competitors in the field but Coke and Pepsi have such a huge share of the market that they don’t usually see them as competition or influence on their business decisions.
Perfect competition – theoretical – as are all the above definitions.
Multiple providers offer a wide choice to a broad spectrum of consumers.
Consumers benefit from freedom of choice and businesses competing for their custom through competitive pricing and customer
References: Bized.co.uk. 2014. Biz/ed - Interactive Supply and Demand 1 | Biz/ed. [online] Available at: http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part1.htm [Accessed: 8 Apr 2014]. Heakal, R. 2014. Demand Curve. [image online] Available at: http://i.investopedia.com/inv/tutorials/site/economics/economics3.gif [Accessed: 8 Apr 2014]. Heakal, R. 2014. Supply Curve. [image online] Available at: http://i.investopedia.com/inv/tutorials/site/economics/economics4.gif [Accessed: 8 Apr 2014]. ---------------- BBC News. 2014. Economy tracker: Inflation. [online] Available at: http://www.bbc.co.uk/news/10612209 [Accessed: 7 Apr 2014]. HM Treasury, HM Revenue & Customs. 2013. Government incentives help 1,100 companies lift off. [press release] 7 November 2013. Staff, I. 2012. Economies Of Scale Definition | Investopedia. [online] Available at: http://www.investopedia.com/terms/e/economiesofscale.asp [Accessed: 8 Apr 2014]. http://www.etoro.com/blog/etoro-voice/19112013/8-things-investors-watching-google/?dl=30001303&utm_medium=Media&utm_source=46599&utm_content=6579&utm_serial=google3.aspx&utm_campaign=google3.aspx&utm_term=http://paid.outbrain.com/network/redir