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Eco Lesson4

Rtt

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18 views2 pages

Eco Lesson4

Rtt

Uploaded by

lanceganal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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A Semi Detailed Lesson Plan in Applied Economics

I. Objectives
At the end of the lesson, the students should be able to:
1. Explain market structures (perfect competition, monopoly, oligopoly, and monopolistic competition
2. Differentiate types of Market structures
3. Portray understanding of the different market structures by means of a collaborative learning activity

II. Subject Matter


Application of Supply and Demand – Market Structure
Code: ABM_AE12-Ie-h-7

Lesson Proper
MARKET STRUCTURES
 Refers to the competitive environment in which buyers and sellers operate.

Competition – is rivalry among various sellers in the market.

Market – a situation of diffused, impersonal competition among sellers who compete to sell their
goods and among buyers who use their purchasing power to acquire the available goods in the
market.

There are varying degrees of competition in the market depending on the following factors:
 Number and size of buyers and sellers
 Similarity or type of product bought and sold
 Degree of mobility of resources
 Entry and exit of firms and input owners
 Degree of knowledge of economic agents regarding prices, costs, demand and supply
condition.

PERFECT COMPETITION
 Implies an ideal situation for the buyers and sellers.

Characteristics of Perfectly Competitive Market


- There are so many buyers and sellers that each has a negligible impact on market price.
Change is output of a single firm will not perceptibly affect market price of the good. No single
buyer can influence the price since he/she purchases only a small amount.
- Homogenous product is sold by sellers, which means the products are highly similar in such a
way consumers will have no preference in buying from one seller over another.
- Perfect mobility of resources refers to the easy transfer of resources in the terms of use or in
terms of geographical mobility.
- There is perfect knowledge of economic agents of market conditions such as present and
future prices, cost and economic opportunities.
- Market price and quantity of output are determined exclusively by forces of demand and
supply.

IMPERFECT COMPETITION
- If one or more of the assumptions of perfect competition will not be met, the market
becomes imperfectly competitive.

Monopoly
- Exists when a single firm that sells in the market has no close substitute. The existence of
monopoly depends on how easy it is for consumers to substitute the products for those of
other sellers.

Reason for Monopoly’s Existence


- A single seller has control of entire supply of raw materials.
- Ownership of patent or copyright is invested in a single seller.
- The producer will enjoy economies of scale, which are savings from a large range of outputs.
- Grant of government franchise to a single firm.
Monopolistic Competition
- One imperfect competitive market wherein products are differentiated and entry and exit are
easy.
- Non-price competition is present in this market. This refers to any action a firm takes to shift
the demand curve for its output to the right without having to sacrifice its prices.

Characteristics of a Monopolistic Competition


- A blend of competition and monopoly
- Firm sells differentiated products, which are highly substitutable but are not perfect
substitutes
- Many sellers offer heterogeneous or differentiated products, similar but not identical and
satisfy the same basic need,
- Changes in product characteristics to increase appeal using brand, flavor, consistency and
packaging as means to attract consumers
- There is free entry and exit in the market that enables the existence of many sellers
- It is similar to a monopoly in that the firm can determine characteristics of product and has
some control over price and quantity.

Oligopoly
- A market that is dominated by a small number of strategically interacting firms. Few sellers
account for most of or total production since barriers to free entry make it difficult for new
firms to enter

Characteristics
- Action of each firm affects other firms
- Interdependence among firm

SIGNIFICANCE OF MARKET STRUCTURE


- Market structure will determine the amount of power or control the business owner will
enjoy
- Greater market power means greater ability to control prices, differentiate the product one
offers for sale, thus, leading to opportunities for more profits.

Generalizations
- What are the different types of market structure? How does they differ from each other?

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