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Warm Up
List your favorite brand for the following:
1. Jeans
2. Shampoo
3. Shoes
• Explain why you like these particular brands?
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Chapter 7Competition, Market
Structures, and the Role of Government
12.2.8 the role of profit as the incentive to the entrepreneurs in a market economy
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Market Structures
• What is the primary aim/goal of businesses?
• To maximize profits
• What is competition?
• Striving against others to reach an objective
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4 Types of Market Structure
1. Pure/Perfect Competition– Large number of buyers and sellers– Identical product– Well informed buyers and sellers
More Competition Less Competition
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Pure/Perfecct Competition
Many buyer/sellers +
Identical Products
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
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Monopolistic Competition
• Meets all condition of perfect competition except for identical products.– Product differentiation
• Monopolistic competitors use nonprice competition– Advertising, giveaways, or other promotions
More Competition Less Competition
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Monopolistic Competition
Same as pure competition except for product differentiation
Gap Levis Lucky
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Monopolistic Competition
Are these shampoos/conditioners different?
Pantene $14.50 Frederic Fekkai $54
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Monopolistic Competition
Are these mascaras different?
Maybelline Sisley
$4 $43
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Oligopoly
• A few very large sellers dominate the industry• Oligopolists act independently by lowering prices
soon after the first seller announces the cut• Collusion: formally agree to set prices• Engage in price wars
More Competition Less Competition
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Oligopoly
Ipod Zune
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Oligopoly
Few producers control supply and price
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Coca-Cola Classic
• Coca-Cola classic
• Sprite
• Dasani
• Barq's
• Dannon
• Nestea
• Rockstar
• Evian
• Fanta
• Fresca
• Minute Maid
• Mr. Pibb
• Powerade
• Seagrams Ginger Ale & Mixers
• TAB
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Pepsi-co
• Aquafina
• Pepsi
• Mountain Dew
• Sierra Mist
• Sobe
• Lipton Brisk Tea
• MUG Root Beer
• Slice
• Gatorade
• Dole Juice
• Tropicana
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Cadbury Schweppes
• 7 Up• Canada Dry• Clamato• Dr Pepper• Hawaiian
Punch• Mott's• Orangina• Snapple
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Toyota
• Toyota• Scion• Lexus
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Chrysler
• Chrysler• Jeep• Dodge
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General Motors
• Chevrolet• Buick• Pontiac• GMC• Saturn• Hummer• SAAB• Cadillac
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Monopoly
• Only one seller of a particular product• Few monopolies
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Monopoly
More Competition Less Competition
• One seller dominates the market with no close substitutes
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Monopoly
• Natural Monopoly - efficient production by a single supplier
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Monopoly
• Geographic Monopoly - small town
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Monopoly
1. Technological Monopoly - new invention
– Patent: exclusive right for 17 years
Segway
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Monopoly
1. Technological Monopoly - new invention
– Copyright: lifetime + 50 years
This telecast is copyrighted by the NFL for the private use of our audience. Any other use of this telecast or of any pictures, descriptions, or accounts of the game without the NFL’s consent, is prohibited.
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Monopoly
1. Government Monopoly - government owned businesses