Texas Tech Economy Chapter 9, Lesson 4, Section 1 Competition & Monopolies

1. Chapter
Competition & Monopo
Page 148

2. Competitio
n
Basic feature of market economic
system
ADVANTAGE
S• Choices
• Lower PricesWHY?
Competing supplies leads to
Do suppliers like comp

3. BUSINESSES are set up based
on # of ownersSole proprietorship, partnership &
corporation
also grouped by competition
facedOr MARKET STRUCTURE

4. 4 BASIC MARKET
STRUCTURES
Fig. 37 p. 149
Perfect Competition
Monopolistic
Competition
Oligopoly

5. Perfect Competition
Monopolistic
Competition
Oligopoly
Monopoly
MARKET STRUCTURE
2 are rare
2 are common
?
?
RARE
RARE - pure

6. All businesses compete
when others produce similar
goods/services.
Market with so many sellers of a
good/service, each having a small share
is called…
Perfect
competitionSo many that no single
buyer/seller can affect

7. Perfect
competition
also known
as
PURE competition
Requires 7conditions to be met

8. 1. A largemarket
NUMEROUS buyers/sellers for
product

9. 2. similar/nearly identic
good/servi
ce

10. 3. easyEntry & Exit
Sellers in market can’t prevent competition OR
entrance
Small initial investment
Good/service is easy to produce

11. 4.info- easy to get
EASY for buyers/sellers – info
about
prices / quality / supply

12. 5.independence
Possibility of sellers/buyers controlling
prices

13. 6.NO CONTROLover
price
1st 5 conditions, price’s controlled by supply &
demandNOT buyers/sellers
PERFECT COMPETITION Needs
many suppliers of similar products & many informed
buyers who know market prices
Market price = equilibrium pricein Pure Competitio
Total supply & total demand interact to reach equilibrium
Because there are so many buyers/sellers, a
person charging more or less DOES NOT affect
market price.

14. 7. information
About PRICES, QUALITY & SUPPLY SOURCES
TODAYit’s easy to find lowest pric
TRUE Perfect Competition
is
RAR

15. WHEAT MARKETas a Perfect Competit
Agricultural Market in U.S.A. – CLOSE to being Pure
Competition
7 conditions1. Large market
1000’s of farmers producing/Wholesalers buying
2. SIMILAR
PRODUCT
3. EASY entry/exitLow
rent/Learnable
4.
4. EASY INFO – Wheat prices on Internet
5. independenceSmall chance of farmers controlling
price6. no control over
prices
NO farmer has big influence on p
7. unique
situation
Inelastic demand
supply side of most agricultural markets is u
Market dependent on conditions over which farmers have little

16. Society Benefits
Intense competition forces price down (costs +
small profit)
Consumers pay for what’s been put in to make
productsOP COST of use of land, lavor, capital &
entrepreneurshipPRICE paid by consumers = true signal of value of product
in society
PURE competitive industries = ECONOMIC

17. upcoming
Monopoly, Oligopoly, Monopolistic
competition &
monopolies