Structures

• What is the focus of market structure analysis?

  How the market is organised
• How can different market structures be represented?

  On a spectrum
• What are the characteristics of different market structures?

  • Number of firms in the market
  • Degree of product differentiation
  • Ease of entry into the market
• How does the number of firms affect market competitiveness?

  More firms lead to a more competitive market
• What is the relationship between product differentiation and market competitiveness?

  More differentiation means less competition
• What type of products exist in a perfectly competitive market?

  Homogenous products
• How can products be differentiated?

  Using price, branding, and quality
• What does product differentiation affect in the market?

  Cross price elasticity of demand
• What does ease of entry into the market refer to?

  The number and degree of barriers to entry
• What is the purpose of barriers to entry?

  To prevent new firms from entering profitably
• How do high barriers to entry affect market competitiveness?

  They make the market less competitive
• How do economies of scale act as a barrier to entry?

  They lower production costs for larger firms
• What effect does brand loyalty have on demand?

  It makes demand more inelastic
• Why is it hard for new firms to gain consumer loyalty?

  Existing firms have strong brand names
• How does controlling important technologies serve as a barrier to entry?

  It limits new firms' ability to compete
• What advantage does a strong reputation provide to firms?

  It helps maintain customer loyalty
• How does backwards vertical integration create a barrier to entry?

  It allows firms to control supplier prices
• What are the types of barriers to entry?

  • Structural barriers: due to production cost differences
  • Strategic barriers: through pricing policies
  • Statutory barriers: such as patents