ECON20023 T1 2008 Lecture 7

ECON20023 T1 2008 Lecture 7 - ECON20023 ECONOMICS FOR...

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Based on slides from Layton et al (2005) 1 ECON20023 ECONOMICS FOR BUSINESS T1 2008 LECTURE 7 Galina Ivanova, CQU
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2 Key concepts What is monopolistic competition? What are some real-world examples of monopolistic competition? How does the firm in monopolistic competition determine its price and output? Why is a normal profit made in the long run? What are some non-price competitive techniques used in oligopoly? Based on slides from Layton et al (2005)
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3 Key concepts (cont.) What is the kinked demand curve? What is price leadership? What is a cartel? What is game theory? Evaluating oligopolistic markets. Based on slides from Layton et al (2005)
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4 What is monopolistic competition? Monopolistic competition features: Many small sellers Differentiated product Non-price competition Easy entry and exit. It is the market structure in which we find more firms than any other structure. Based on slides from Layton et al (2005)
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5 Many small sellers Each firm is so small, relative to the total market, that each firm’s pricing decisions have a negligible effect on the market price. Based on slides from Layton et al (2005)
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6 Product differentiation Product differentiation is the key feature of monopolistically competitive markets. Product differentiation is the process of creating real or apparent differences between goods and services. Such differences give firms the capacity to increase their prices. Based on slides from Layton et al (2005)
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7 Non-price competition In monopolistically competitive markets, firms compete using non-price techniques: Advertising Packaging Product development Better service. This avoids having to compete by lowering prices. Based on slides from Layton et al (2005)
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8 Easy entry and exit Monopolistic competition features low barriers to entry. Thus entry for new firms is fairly easy, especially if they can differentiate themselves from competitors. Based on slides from Layton et al (2005)
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The firm as a price maker Monopolistically competitive firms are price makers, i.e. they have limited control over their price. This contrasts with perfectly competitive
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This note was uploaded on 09/06/2009 for the course MGMT econ taught by Professor Galinaivanova during the Spring '09 term at University of Central Arkansas.

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ECON20023 T1 2008 Lecture 7 - ECON20023 ECONOMICS FOR...

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