Warm Up: Why does competition influence price? Look over the products at your desks. Identify the...

Warm Up:Why does competition influence price?

Look over the products at your desks. Identify the firms’ competition in its industry (as a lot, a little, or none). And then put the products in order from most to least competition.

Market Structures

The NATURE and DEGREE of COMPETITION among firms in the same industry

There are 4 Market Structures

1. Perfect Competition

2. Monopolistic Competitioin

3. Oligopoly

4. Monopoly

Make a Table in your notes:

Perfect Competition

Monopolistic Competition

Oligopoly Monopoly

Products Are

Level of Competition

Control over Price

Advertising

Example

PERFECT COMPETITION

Products Are:– Identical, no name brands

Competition:– Lots of small competitors

Control Over Price:– No control over price

Advertising:– No need, No way to distinguish.

MONOPOLISTIC COMPETITION

Products Are:– Similar, with name brands

Competition:– Lots of competitors

Control Over Price:– Some Control when consumer is brand loyal

Advertising:– Lots to create differentiations

OLIGOPOLY

Products Are:– Similar, with name brands

Competition:– FEW major competitors

Control Over Price:– Some, when consumers are loyal

Advertising:– Much, to beat out rival & differentiate

MONOPOLY

Products Are:– Unique

Competition:– None

Control Over Price:– Total

Advertising:– No need

Create a list

Write down 4 different goods for each of the Market Structures that we discussed yesterday. Use your white boards and discuss with your groups

Spectrum of Demand

Elastic: a change in price results in a large change in quantity demanded, many substitutes

Inelastic: a change in price results in a little to no change in quantity demanded, few to no substitutes

Perfect Competition Monopoly

OligopolyMonopolistic Competition

Cut & Paste Logo Time

Each group has in front of them:– Paste, scissors and numerous company logos

Each student must cut and paste at least 6 different companies and place them on the spectrum varying their elasticities.