Summary
Summary Market Structure
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A look at the different types of markets including: duopoly, monopoly, perfect competition, oligopoly and competitive market.
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Monopoly: A situation in which a single company or group owns all or nearly all of Duopoly: A situation in which two suppliers dominate the market for a commodity or service.the market for a given type of product or service. By definition, monopoly is
Advantages Disadvantages
characterized by an absence of competition, which often results in high prices
For customers, this type of market is easier to make price New firms cant enter the market due to the various barriers
and inferior products. comparisons between businesses. This forces businesses to to entry. This means competition in the market is reduced
set their prices competitively which benefits customers. and has negative impacts on the consumer: high price,
Advantages Disadvantages lower quality as there is less competition.
These large firms have a strong hold over the market as they With the presence of little competition business may get
Research and development: Monopolies can make Exploitation of consumers:
are well known and reduces advertising costs and can competent and not improve their product constantly as
supernormal profits, this can be used to fund high Businesses may get the product at produce high profits as there are few 'players' in the market. there is little competition represent, meaning customers get
cost capital investment spending. Successful a low costs but charge a high price a lower quality product.
research can be used for improved products and to obtain a higher profit. This Hard to enter the market, meaning the business can protect Firms cannot take independent and always have to consider
lower costs in the long term which benefits the means consumers are paying a high their competitive advantage and say strong in that market. the views of other dominant players in the market in setting
consumers as well. This is important in certain price for a product that isn't worth Also as there is only one major competitor it is easier to the price etc. price fixing.
industries i.e. telecommunications and aeroplane that high costs. mimic competitor actions as there is only two main
manufacture. businesses in the market.
Economies of scale: Increased output will lead to a Restriction of consumer choice: As
decrease in average costs of production. These there is little/no competition the Oligopoly: A state of limited competition, in which a market is shared by a small number of
can be passed on to consumers in the form of main monopoly will be the only producers or sellers. A situation in which a particular market is controlled by a small group
lower prices. company to offer that product, of firms.
reducing the consumers purchasing
options. Advantages Disadvantages
Monopolies are successful firms: A firm may Increase in product price: As there Easy to mimic competitors as there is Illegal price fixing which is anti-
become a monopoly through being efficient and is no competition, the main a few businesses in this market, competitive can have a negative impact
dynamic. A monopoly is thus a sign of success not monopoly business is in command Market meaning the business can stay on customers with higher prices as the
competitive. firms have an agreement to set the prices
inefficiency i.e. Google. and can set the price at a higher Structure high.
level as no competition is present.
Supernormal profits can be made and Barriers to entry: New businesses find it
This impacts negatively on the this may be passed on to consumers in hard to enter the market, reducing
consumer. the form of lower prices. competition in the market.
Easier for consumers to compare the Little competition: Businesses may
pricing between businesses and can become competent and will not
Perfect Competition: The situation prevailing in a market in which buyers and sellers are so find the best value for their money. constantly improve their product, leading
numerous and well informed that all elements of monopoly are absent and the market price of a to a lower standard of product for
commodity is beyond the control of individual buyers and sellers. consumers.
Advantages Disadvantages Competitive Market: A competitive market is one in which a large numbers of producers compete with each other to satisfy the wants and needs
Many firms exist which means customers have a A business may have to set a low price to of a large number of consumers. In a competitive market no single producer, or group of producers, and no single consumer, or group of
larger choice and customers can get best value for compete with other businesses. This will consumers, can dictate how the market operates. Nor can they individually determine the price of goods and services, and how much will be
money. reduce the businesses profits as they exchanged.
may only make a small profit per unit.
No restrictions to entry which means that for new Within this market, branding is key, this Advantages Disadvantages
businesses they can easily enter the market and involves buying advertising slot on prime They can allocate resources in the most efficiently meaning All products are homogeneous meaning customers don't have a
begin their trade. time TV which is expensive and increases they can reduce costs as they operate effectively and wide variety of products to choose from as they may not
the costs for the business and reduces productively. These reduced costs could be passed to the differentiate between each other. Thus reduces consumer choice.
their profit margin. consumer in lower prices. Thus the business could gain a larger
Firms and buyers are well informed on competitors As a business, there is a lot of choice, market share as they offer better value for money.
prices meaning that: meaning customers can easily swap Customers can easily monitor the prices of other companies, Lack of supernormal profits mean the investment of research and
1. Businesses can easily mimic competitor between businesses as there is suitable meaning they get best value for their money. development is of a lower quality than monopoly research. This will
actions. alternatives. result in a lower quality of market research and a lower quality of
2. Customers can find the best price product.
possible. Prices will have to be set fairly in order to compete which With perfect knowledge and transparency in this market there is no
benefits customers with lower prices. incentive to develop new technology as the information is out in
the open. This means that consumers don't get new products
regularly.
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