Concepts
- Perfect Competition
- Thousands of Firms
- Homogeneous/Identical Product
- No Barriers to Entry
- Firms Are Price Takers
- Monopolistic Competition
- Hundred Firms, Give or Take
- Differentiated Product
- Limited Barriers to Entry
- Oligopoly
- Handful of Firms, Give or Take
- Significant Barriers to Entry
- Mutual Interdependence Amoung Firms
- Monopoly
- One Firm
- One-of-a-Kind Product
- Firm is a Price Maker
Overview
In microeconomics there are two major types of markets: Product Markets and Factor Markets. Product markets are where outputs are bought/sold and factor markets are where inputs are bought/sold. Each major type of market has market structures, or group dynamics, that exist within them. In this lesson we learn some of the basic characteristics of product market structures. There are four that we cover in this class: Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly. Perfect Competition is a hypothetical market structure that simulates the most competitive enviornment that could ever possibly exist. Imagine thousands of firms selling an identical product with a seemingly endless number of customers ready and willing to buy the product at the market price (Price Taker). Monopolistic Competition is a realistic market structure where many firms compete against one another trying to establish product differentiation. Oligopoly is another realistic group dynamic where only a handful of firms are competing against one another. Mutual interdepence exists because with such a small number a firms, an action taken by one firm will impact what happens to the other firms in the market. Finally, a monopoly is a market structure where only one firm exists. It has a one-of-a-kind product and as a result has a lot of power over the price that gets charged (Price Maker).
Materials
Lecture
Product Market Structures Lecture Video
Quiz
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