Warm Up: Why does competition influence price?

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Warm UpWhy does competition influence price?

• Look over the products at your desks. Identify
  the firms competition in its industry (as a lot,
  a little, or none). And then put the products in
  order from most to least competition.

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Market Structures

• The NATURE and DEGREE of COMPETITION among firms
  in the same industry
• There are 4 Market Structures
• 1. Perfect Competition
• 2. Monopolistic Competitioin
• 3. Oligopoly
• 4. Monopoly

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Make a Table in your notes
Perfect Competition Monopolistic Competition Oligopoly Monopoly
Products Are
Level of Competition
Control over Price
Advertising
Example
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PERFECT COMPETITION

• Products Are
• Identical, no name brands
• Competition
• Lots of small competitors
• Control Over Price
• No control over price
• Advertising
• No need, No way to distinguish.

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MONOPOLISTIC COMPETITION

• Products Are
• Similar, with name brands
• Competition
• Lots of competitors
• Control Over Price
• Some Control when consumer is brand loyal
• Advertising
• Lots to create differentiations

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OLIGOPOLY

• Products Are
• Similar, with name brands
• Competition
• FEW major competitors
• Control Over Price
• Some, when consumers are loyal
• Advertising
• Much, to beat out rival differentiate

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MONOPOLY

• Products Are
• Unique
• Competition
• None
• Control Over Price
• Total
• Advertising
• No need

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Create a list

• Write down 4 different goods for each of the
  Market Structures that we discussed yesterday.
  Use your white boards and discuss with your groups

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Spectrum of Demand
Perfect Competition
Monopoly
Monopolistic Competition
Oligopoly
Inelastic a change in price results in a little
to no change in quantity demanded, few to no
substitutes
Elastic a change in price results in a large
change in quantity demanded, many substitutes
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Cut Paste Logo Time

• Each group has in front of them
• Paste, scissors and numerous company logos
• Each student must cut and paste at least 6
  different companies and place them on the
  spectrum varying their elasticities.

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