Chapter 7 Flashcards
(41 cards)
It is a place where goods are being bought and sold. In economics, it is a place where buyers and sellers are exchanging goods and services with the following consideration.
Market
Following considerations to be called market:
-Types of goods and services being traded;
-The number and size of buyers and sellers in the market.
-The degree to which information can flow freely.
2 Types of Market Structure
Perfect and Imperfect Market
It is a market situation which
consists of a very large number of buyers and sellers offering a
homogenous product.
Under such condition, no firm can affect the market price.
Perfect Market
It is built on two critical
assumptions: the behavior of an individual firm, and
the nature of the industry in which it operates.
Perfect Competition
It cannot be found in the real world.
Perfect Competition
For perfect competition to exist, the ff. condition must be observed and required:
- A large number of sellers, each acting independently and not colliding with any other.
- Serving a homogeneous product.
- No artificial restriction placed upon price or quantity.
- Easy entry and exit.
- All buyers and sellers have perfect knowledge of market conditions and any changes that occur in the market.
- Firms are “Price Taker”
It is a market situation wherein the conditions necessary for perfect competition are not satisfied.
Imperfect Market
Forms of Imperfect Market
-Monopoly
-Oligopoly
-Monopolistic
The term monopoly comes from the Greek words “monos” means
“one”
“polein” which means “________”, there is only one seller of goods and services.
to sell
Only one producer in the industry, hence, there is a lack of economic competition
and viable substitute for the goods and services that they provide.
Monopoly
The “____________” can influence and has considerate control over the price. should be distinguished from a “cartel”.
monopolist
It should be distinguished from a “cartel”.
Monopoly
The following sources of Monopoly:
- There is only one producer or seller of goods and only one provider of services in the market.
- New firms find extreme difficulty in entering the market.
- There is no available substitute so that a product or
service is considered unique. - It controls the total supply of raw materials in the industry
and has control over price. - It owns a patent or copyright.
- Its operations are under economics of scale.
Classification of Monopoly
- Natural Monopoly
- Legal Monopoly
- Coercive Monopoly
A single firm can supply the entire market due to the fundamental cost structure of the industry.
Natural Monopoly
This is sometimes called as “de jure monopoly” a form of monopoly which the government grants to a private individual or firm over the
product or service.
Legal Monopoly
It is a form of monopoly whose existence as the sole producer and distributor of goods and services is by means of coercion (legal or illegal).
Coercive Monopoly
The word comes from the Greek word “oligos” means ______
“few”
It is a market situation in which there is a small number of seller. All decisions depends
on how the firm behave in relation to each other.
Oligopoly
The characteristic of Oligopoly includes:
- There is small number of firms in the market selling differentiated or identical
products. - The firm has control over price.
- There is an extreme difficulty for new competition to enter the market
Types of Oligopoly
- Pure Oligopoly
- Differentiated Oligopoly
Few sellers that produce identical products.
Example: cement, sugar, and other raw materials.
PURE OLIGOPOLY
