Embedded Files
--THINK AHEAD--
--THINK AHEAD--
"Let's take a walk down this street in my old neighborhood in Shilin, Taipei City." "What do you notice a lot of?" "Is this perfect comp?" "Do the firms have any price-setting ability?"
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"So while featuring some characteristics of perfect competition, each shop still has some form of differentiation and, as a result, some (if only slight) price-setting ability."
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"Now you have a go!", "Can you think of a street near you that exhibits these features?"
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"The name given to this type of market structure "
--DEFINITION--
--DEFINITION--
"The name given to this type of market structure is MONOPOLISTIC COMPETITION and is defined as a 'MARKET STRUCTURE' that EXHIBITS FEATURES of BOTH the PERFECTLY COMPETITIVE model and the MONOPOLY model. In this model, firms have some degree of PRICE-SETTING ABILITY (MARKET POWER) due to PRODUCT DIFFERENTIATION; however, their demand curves are RELATIVELY ELASTIC with VERY LOW BARRIERS TO ENTRY AND EXIT."
--PERFECT COMP. FEATURES--
--PERFECT COMP. FEATURES--
--LARGE NUMBER OF FIRMS--
"Exactly like the PC model, firms in monopolistic competition have many competitors, meaning their market share is rather insignificant."
--NO BARRIERS TO ENTRY--
Exactly the same feature as in the PC model.
--MONOPOLY FEATURES--
--MONOPOLY FEATURES--
--PRODUCT DIFFERENTIATION--
"This feature of the model ALLOWS THE FIRMS TO ESTABLISH SOME DEGREE OF UNIQUENESS that GIVES THEM MARKET POWER (ABILITY TO SET PRICES) and hence a DOWNWARD SLOPING DEMAND CURVE, which is obviously LESS ELASTIC THAN IN PC yet MORE ELASTIC THAN IN A MONOPOLY, due to the large number of close substitutes that exist."
--TYPES--
"If we can't differentiate on price, we can do the following...."
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"We can offer assurance and free delivery..."
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"We can locate ourselves uniquely..."
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"We can promote our image through packaging and sponsorships etc..."
--THINK AHEAD--
--THINK AHEAD--
"Most international schools face competition and rarely compete on price (PRICE COMPETITION), yet they do have some degree of price-setting ability based on their ability to 'differentiate themselves' from rivals through the use of 'NON-PRICE COMPETITION.'. Can you think of how your school uses this type of competition?"
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--SHORT RUN PROFIT DIAGRAMS--
--SHORT RUN PROFIT DIAGRAMS--
--PROFIT MAXIMISING MONOPOLISTIC FIRM earning ECONOMIC PROFIT, NORMAL PROFIT, and incurring MINIMUM LOSSES--
--PROFIT MAXIMISING MONOPOLISTIC FIRM earning ECONOMIC PROFIT, NORMAL PROFIT, and incurring MINIMUM LOSSES--
--LONG RUN PROFIT DIAGRAMS--
--LONG RUN PROFIT DIAGRAMS--
--A MONOPOLISTIC firm with SR ECO. PROFIT & LR NORMAL PROFITS--
--A MONOPOLISTIC firm with SR ECO. PROFIT & LR NORMAL PROFITS--
In monopolistic markets, due to product differentiation, each firm has its own slightly unique supply and demand curve, meaning it is not possible to create an industry demand and supply curve. Therefore, when firms are making eco. profit in the SR and other firms enter, they are not directly increasing the supply of the EXACT same good, rather a differentiated alternative, however, the result is still the same in terms of a lowered demand curve.
--A MONOPOLISTIC firm with SR LOSSES & LR NORMAL PROFITS--
--A MONOPOLISTIC firm with SR LOSSES & LR NORMAL PROFITS--
--EFFICIENCY DIAGRAMS--
--EFFICIENCY DIAGRAMS--
--MONOPOLISTIC vs PERFECT COMP.--
--MONOPOLISTIC vs PERFECT COMP.--
--MONOPOLISTIC vs MONOPOLY--
--MONOPOLISTIC vs MONOPOLY--
--ASSESSMENT--
--ASSESSMENT--
--KAHOOT--
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