4 Types of Market Structuresthat

for Business Competition

1) PURE COMPETITION

Conditions for Pure Competition

Condition 1:

Many buyers and sellers.

Conditions for Pure Competition

Condition 2:

Sellers offer identical products.

Conditions for Pure Competition

Condition 3:

Buyers and sellers are well-informed about

items for sale.

Conditions for Pure Competition

Condition 4:

Sellers are free to enter the market.

Pure competition relies on Non-Price Competition. This means they don’t rely on price when buying. Instead, they look at things like:

1. Physical characteristics2. Location

3. Service level4. Advertising, image, or status

2) Monopolistic Competition

vs.

Monopolistic Competition

Condition 1:

Many sellers.

Monopolistic Competition

Condition 2:

Sellers offer different products, but they are

similar.

Monopolistic Competition

Condition 3:

Sellers have some control over their prices.

Product DifferentiationWhen a business makes a product

different from other similar products

Product Differentiation

3) OligopolyA market situation in which a few large sellers of a product dominate.

Oligopoly

1. A few sellers in the market dominate = less competition

2. Some variety of goods

3. Some control of price

3 Conditions:

4) MonopolyA market situation with only one seller of a particular product controls the market for that product.

Monopoly

1. One seller

2. No variety of products

3. Sellers have total control of their prices

3 Conditions

Four types of Monopoly

Natural – a situation where costs are minimized by having a single producer

Four types of Monopoly

Geographic – When an area is too small to support two or more businesses.

Four types of Monopoly

Technological – When a business discovers or invents something entirely new

Four types of Monopoly

Government – when a business is owned and operated by the government

The business cycle is the recurring ups and downs of the economy.

Business Cycle

Peak – the best

Recession – decrease for six months

Trough – the worst

Expansion – improving

If a recession is very severe it may turn into a depression. The U.S. has experienced only one of these in the 1930’s.

The Consumer Price Index (CPI) is used to measure price changes over a period of time to measure the economy.

Inflation vs. Deflation

Inflation – rise in the general price level. As years go by, prices generally rise.

Deflation – decrease in the general price level. Only time this happened was during Great Depression.