market structures Flashcards
The government and consumers want competition in the market place
WHY?
• Higher efficiency
• Lowest prices & greater purchasing power of income
• Better quality goods and services
• Greater output of particular goods and services
• Improves international competitiveness of local firms
• Lifts material wellbeing and living standards
Market power
the ability of any particular business (or group of businesses) to control or manipulate prices or quantities in a market.
perfect/pure competition
large number of sellers and buyers
Perfectly homogenous products (exactly the same products are sold by different sellers)
no barriers to entry/exist when a profit opportunity has been identified in the market / somewhere else
buyers and sellers posses perfect info
price takers
above conditions ensure that no business can have market power and set higher prices than the market forces set.
price takers have impact on?
price
efficiency in the allocation of resources
perfect competition overview
features: large number of buyer sellers.
competition: equal
Market power: Spread between competition
pieces : business are price takers / prices are relatively similar
Eficiency in resource allocation: high efficiency
Impact on Iving standards: high
living standards
total welfare of all people in a country like Australia, made up of both material e.g..) access to goods/services and non material (quality of life) e.g.) literacy rates, crime rates , air quality) factors
effcient allocation of resources
The economy is maximining its outputs from its inputs and maximizing that nations living standards
Public goods
goods/services available for all people to use, gain benefit from or enjoy.Socially desirable and important to all
non excludable (all can use them)
non depletable
eg.) transport, health and education.
They are costly so no one supplies them resulting in no market price.
Private goods:
Private goods: excludable and depletable / rivalrous - e.g. an ice
cream
(public) Non-excludable
- you cannot exclude non-payers from enjoying the benefits that the good or service provides, which gives rise to the free rider problem
(public) Non-depletable/non-rivalrous in consumption
one person’s consumption does not diminish the ability of another person to enjoy the same consumption, so all benefit equally
Role and Effect of Government interventions
- public goods
ensure that public goods are provided in order to address the under allocation of resources.
Gov subsidies in the form of a cash payment to private suppliers to cover costs incurred in the provision of public goods.
externality
results when the well-being of a third party not involved in a transaction (or activity) is affected.
Positive externalities
the third party receives a benefit from the production or consumption of a good at service.
Benefit/reward is not received by the consumer or producer, therefore, there is no incentive to produce or consume.
