Competative and Concentrated Markets Definitions

The organisation of a market in terms of the number of firms in the market and the way they behave

A firm which passively accepts the ruling market price set by the conditions outside its control

A firm possessing the power to set the price within the market

• - A large number of buyers and sellers
• - Perfect market information
• - The ability to buy or sell as much as desired at the market ruling price
• - The inability of an individual buyer or seller to influence the market price
• - A uniform or homogenous product
• - No barriers to entry or exit in the long run

A competitive market is one in which firms strive to outdo their rivals, but it does not necessarily meet all the conditions of perfect competition.

A market containing very few firms

When there is only one firm in the market

The power of the firm to act as a price maker rather than a price taker

Any market structure lying between the extremes of perfect competition and pure monopoly

Occurs when a firms total revenue is the furthest above total cos of production

Occurs when sales revenue is maximised

Occurs when a firm maximises its percentage share of the market in which i sells its product

Makes it difficult or impossible for new firms to enter the market

Makes it difficult or impossible for new firms to leave the market

Through exercising their spending power, consumers collectively determine what is produced in a market. Consumer sovereignty is strongest in a perfectly competitive market

Producers or firms in a market determine what is produced and what prices are charged

• When a country or firm has complete control of a natural resource
• When there is only one room in a market for one firm benefitting from economies of scale to the full

A strategic or man-made barrier to entry caused by govt legislation protecting the right of a firm to be the sole producer of a patented good unless the firm grants royalties for other firms to produce the goods.

A barrier to market entry which is not man-made

A barrier to market entry which is man-made

Provides consumers and producers with useful inflation about goods or services

Attempts to persuade potential customers that a good or service possesses desirable characteristics that make it worth buying

Through flooding the market with information and persuasion about a firm’s product. This can act as a man-made barrier to market entry because small forms cannot compete.

Making a product different through design, how it is made or through its functionality

A ratio which indicates the total market share of a number of leading firms in a market, or the output of these firms as a percentage total output

A market dominated by a few firms

When resources are allocated in a way which does not maximise economic welfare

Co-operation between forms, for example to fix price. Some forms of collusion may be in the public interest, for example, research and labour training schemes.

Creates new ideas for products and processes

Converts the results of invention into marketable products or services

Reducing the price of a good or service to gains ales by making it more attractive to consumers.

Reducing the price of a good to just above the average cost to deter the entry of new firms into the market. Prices are set at levels which are likely to make it unprofitable for potential entrants who might consider coming into the market.

Temporarily reducing the price of a good to below average cost to drive smaller firms or new entrants out of the market.