the organisation of a market in terms of the number of firms in the market and the ways in which they behave
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price taker
a firm which passively accepts the ruling market price set by market conditions outside its control
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price maker
a firm possessing the power to set the price within the market
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perfect competition
a market that displays the six conditions e.g.no barriers to entry and exit
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competitive market
a competitive market is one in which firms strive to outdo their rivals, but it does not necessarily meet all the conditions of perfect competition
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concentrated market
a market containing very few firms, in the extreme only one firm
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pure monopoly
when there is only one firm in the market
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monopoly power
the power of a firm to act as a price maker rather than as a price taker
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imperfect competition
any market structure lying between the extremes of perfect competition and pure monopoly
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profit maximisation
occurs when a firm's total sales revenue is furthest above total cost of production
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sales maximisation
occurs when sales revenue is maximized
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market share maximisation
occurs when a firm maximizes its percentage share of the market in which it sells its product
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entry barrier
makes it difficult or impossible for new firms to enter a market
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exit barrier
makes it difficult or impossible for firms to leave a market
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consumer sovereignty
through exercising their spending power, consumers can collectively determine what is produced in a market
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producer sovereignty
producers or firms in a market determine what is produced and what prices are charged
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natural monopoly
2 meanings: when a country or firm has complete control of a natural resource and when there is only room in a market for one firm benefiting from economies of scale to the full
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patent
a strategic or man-made barrier to market entry caused by government legalization protecting the firm to be the sole producer of a patented good
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natural barrier to entry
a barrier to market entry which is not man-made
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artificial barrier to entry
a barrier to market entry which is man-made
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informative advertising
provides consumers and producers with useful information about goods or services
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persuasive advertising
attempts to persuade potential customers that a good or service possesses desirable characteristics that make it worth buying
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saturation advertising
this functions as a man-made barrier to market entry by making it difficult for smaller firms to compete
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product differentiation
making a product different from other products through product design, the method or producing the product, or through its functionality
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quantity setter
a firm chooses the quantity of a good to sell, rather then its price.
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concentration ratio
a ratio which indicates the total market share of a number of leading firms in the market, or the output of these firms as a percentage of total market output
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oligopoly
a market dominated by a few firms
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resource misallocation
when resources are allocated in a way which does not maximize economic welfare
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collusion
co-operation between firms, for example to fix prices
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invention
creates new ideas for products or processes
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innovation
converts the results of invention into marketable products or services
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price competition
reducing the price of a good or service to gain sales by making it more attractive for consumers
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limit pricing
reducing the price of a good to just above average cost to deter the entry of new firms into the market
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predatory pricing
temporarily reducing the price of a good to below average cost to drive smaller firms or new entrants out of the market
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Other cards in this set
Card 2
Front
a firm which passively accepts the ruling market price set by market conditions outside its control
Back
price taker
Card 3
Front
a firm possessing the power to set the price within the market
Back
Card 4
Front
a market that displays the six conditions e.g.no barriers to entry and exit
Back
Card 5
Front
a competitive market is one in which firms strive to outdo their rivals, but it does not necessarily meet all the conditions of perfect competition
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