Understanding market structures is fundamental in economics as it influences how firms operate, compete, and make strategic decisions. This article delves into the key elements that define different market structures, specifically focusing on the number of firms, product types, and barriers to entry. Tailored for students of the AS & A Level Economics curriculum (9708), it provides a comprehensive exploration of these concepts, essential for grasping the intricacies of the price system and the microeconomy.

Key Concepts

1. Overview of Market Structures

Market structures categorize the competitive environment in which businesses operate. They are primarily defined based on three key attributes:

Number of Firms: Refers to how many companies are competing within the market.
Product Type: Indicates whether the products offered are homogeneous or differentiated.
Barriers to Entry: The obstacles that new firms must overcome to enter the market.

These attributes collectively determine the competitive behavior, pricing strategies, and overall efficiency of the market.

2. Perfect Competition

Perfect competition is an idealized market structure characterized by a large number of small firms, homogeneous products, and no barriers to entry.

Number of Firms: Numerous small firms, each with an insignificant market share.
Product Type: Homogeneous (identical) products, making them perfect substitutes for one another.
Barriers to Entry: None. Firms can freely enter or exit the market based on profitability.

Examples: Agricultural markets like wheat or corn markets where products are standardized. Price Determination: In perfect competition, firms are price takers. The market determines the price based on the intersection of aggregate supply and demand. An individual firm faces a perfectly elastic demand curve, represented by: $$ P = MC $$ Where:

P = Price
MC = Marginal Cost

This implies that firms maximize profit where price equals marginal cost. Advantages:

Allocative and productive efficiency.
Consumers benefit from the lowest possible prices.

Limitations:

Unrealistic assumptions rarely met in real-world markets.
Lack of product variety.

3. Monopolistic Competition

Monopolistic competition blends elements of perfect competition and monopoly, featuring many firms that sell differentiated products.

Number of Firms: Large number of firms, each holding a small market share.
Product Type: Differentiated products, allowing firms to have some control over pricing.
Barriers to Entry: Low barriers, enabling new firms to enter the market with relative ease.

Examples: Restaurants, clothing brands, and consumer electronics where products vary in quality, features, or branding. Price Determination: Firms have some pricing power due to product differentiation. The demand curve is downward sloping, indicating that firms can set prices above marginal cost without losing all customers. Profit Maximization: Firms produce where: $$ MR = MC $$ Where:

MR = Marginal Revenue
MC = Marginal Cost

Advantages:

Product variety enhances consumer choice.
Encourages innovation and differentiation.

Limitations:

Inefficiency due to excess capacity.
Potential for misleading advertising.

4. Oligopoly

An oligopoly consists of a few large firms dominating the market, often leading to strategic interactions among them.

Number of Firms: Small number of large firms, each holding a significant market share.
Product Type: Can be homogeneous or differentiated.
Barriers to Entry: High barriers due to economies of scale, brand loyalty, and control over essential resources.

Examples: Automobile industry, telecommunications, and airlines. Price Determination: Firms may engage in non-price competition, such as advertising and product innovation. They may also form collusive agreements to control prices, leading to higher profits. Key Models:

Cartels: Formal agreements among firms to fix prices and output.
Kinked Demand Curve: Suggests that firms will match price decreases but not price increases, leading to price rigidity.

Equilibrium Concepts: Nash Equilibrium is often used to describe the outcome where no firm can benefit by unilaterally changing its strategy. Advantages:

Economies of scale can lead to lower average costs.
Potential for innovation through competition.

Limitations:

Possibility of collusion leading to higher prices.
Barriers to entry can stifle competition.

5. Monopoly

A monopoly exists when a single firm dominates the entire market, with no close substitutes for its product.

Number of Firms: Only one firm operates in the market.
Product Type: Unique product with no close substitutes.
Barriers to Entry: Extremely high, often due to legal protections, control over resources, or significant economies of scale.

Examples: Public utilities like water supply, electricity generation, and patented pharmaceutical drugs. Price Determination: The monopolist has significant control over the price, setting it above marginal cost to maximize profits. The profit-maximizing condition is: $$ MR = MC $$ However, since the monopolist faces a downward-sloping demand curve, $P > MC$. Efficiency Considerations: Monopolies are often deemed allocatively and productively inefficient, leading to deadweight loss in the economy. Advantages:

Potential for significant profits to fund research and development.
Can achieve economies of scale, leading to lower average costs.

Limitations:

Consumer exploitation through higher prices.
Lack of innovation due to absence of competitive pressure.

6. Summary of Market Structures

The primary market structures—Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly—differ based on the number of firms, product differentiation, and barriers to entry. Perfect competition and monopolistic competition feature many firms with low barriers, whereas oligopolies and monopolies consist of fewer firms with significant entry barriers. Product types range from homogeneous in perfect competition to unique in monopolies. Understanding these distinctions is crucial for analyzing firm behavior, market outcomes, and economic policies.

Advanced Concepts

1. Game Theory in Oligopolies

Oligopolistic markets are characterized by strategic interactions among a few dominant firms. Game theory provides a framework to analyze and predict the behavior of these firms. Key Concepts:

Payoff Matrices: Represent the potential outcomes based on firms' strategies.
Nash Equilibrium: A situation where no firm can benefit by unilaterally changing its strategy.
Dominant Strategies: Strategies that yield a higher payoff regardless of competitors' actions.

Prisoner's Dilemma: A classic example illustrating how firms might not cooperate even if it’s in their best interest. $$ \begin{align*} &\text{Firm B} \\ &\begin{array}{c|c|c} & \text{Cooperate} & \text{Defect} \\ \hline \text{Cooperate} & (3,3) & (0,5) \\ \text{Defect} & (5,0) & (1,1) \\ \end{array} \end{align*} $$ In this matrix, both firms defecting leads to a worse outcome than mutual cooperation, highlighting the tension between individual rationality and collective benefit. Applications:

Price Wars: Firms may engage in aggressive pricing to undercut competitors.
Collusive Agreements: Firms might collude to set prices or output, though such actions are often illegal.

Limitations:

Assumes rational behavior, which may not always hold true.
Real-world complexities can render simple models inadequate.

2. Price Discrimination in Monopolies

Price discrimination involves charging different prices to different consumers for the same product, based on their willingness to pay. Types of Price Discrimination:

First-Degree: Charging each consumer their maximum willingness to pay.
Second-Degree: Varying prices based on the quantity consumed or product version.
Third-Degree: Segmenting consumers into groups and charging different prices to each group.

Conditions for Price Discrimination:

Market Power: The firm must have some control over the price.
Market Segmentation: Ability to segment consumers without allowing resale.
Different Elasticities of Demand: Different consumer groups must have varying price sensitivities.

Benefits:

Increased profitability for firms.
Potential welfare gains by allocating goods to those who value them most.

Criticisms:

Perceived as unfair by consumers.
Potential for exploitation and reduced consumer surplus.

3. Barriers to Entry and Market Dynamics

Barriers to entry are obstacles that make it difficult for new firms to enter a market. They play a crucial role in maintaining the market structure by limiting competition. Types of Barriers:

Economic Barriers: High initial capital requirements, economies of scale.
Legal Barriers: Patents, licenses, regulatory approvals.
Strategic Barriers: Aggressive pricing, heavy advertising, exclusive agreements.

Impact on Market Structure:

Monopolies: High barriers prevent new entrants, sustaining the monopoly.
Oligopolies: Significant barriers maintain the few-firm dominance.
Perfect and Monopolistic Competition: Low barriers facilitate a large number of firms.

Dynamic Barriers: Some barriers evolve over time, such as technological advancements that can both create and remove barriers. Policy Implications: Governments may intervene to reduce barriers to entry to enhance competition, using antitrust laws and regulations.

4. Product Differentiation and Consumer Choice

Product differentiation refers to the process by which firms distinguish their products from competitors' products to attract consumers. Dimensions of Differentiation:

Physical Attributes: Features, quality, design.
Branding: Brand reputation, packaging.
Customer Service: After-sales support, warranties.

Benefits of Product Differentiation:

Enhanced Consumer Choice: Consumers can select products that best meet their preferences.
Reduced Price Sensitivity: Unique products can command premium prices.
Increased Brand Loyalty: Differentiated brands can build a loyal customer base.

Challenges:

Costs: Firms may incur higher costs in differentiating products.
Imitation: Competitors may replicate successful differentiation strategies.

5. Innovation and Market Structure

Innovation is a critical driver of economic growth and plays a significant role in shaping market structures. Relationship Between Innovation and Market Structure:

Monopolies: May have resources to invest in research and development, leading to technological advancements.
Oligopolies: Compete through innovation to gain a competitive edge.
Monopolistic Competition: Encourage product innovation to differentiate from competitors.

Types of Innovation:

Incremental Innovation: Small improvements to existing products or processes.
Radical Innovation: Significant breakthroughs that create new markets or disrupt existing ones.

Impact on Competition: Innovation can lower barriers to entry by reducing the cost of production or creating new niches, thereby influencing the intensity and nature of competition.

6. Economies of Scale and Market Structure

Economies of scale refer to the cost advantages that firms obtain due to their scale of operation, leading to a lower cost per unit as production increases. Types of Economies of Scale:

Internal Economies: Arise within the firm from factors like specialization, bulk purchasing, and technological advancements.
External Economies: Occur within an industry when the growth of the industry benefits all firms, such as improved infrastructure or skilled labor pools.

Role in Market Structures:

Monopolies: Large scale can create significant cost advantages, making it difficult for new entrants to compete.
Oligopolies: Firms may achieve dominant market positions through economies of scale.
Perfect Competition: Firms operate at minimum efficient scale, ensuring no single firm has a cost advantage.

Impact on Competition: Economies of scale can lead to market consolidation, increased market power for large firms, and reduced competition.

Comparison Table

Market Structure	Number of Firms	Product Type	Barriers to Entry	Price Control	Example Industries
Perfect Competition	Many small firms	Homogeneous	None	Price Takers	Agricultural products like wheat
Monopolistic Competition	Many firms	Differentiated	Low	Some price control	Restaurants, clothing brands
Oligopoly	Few large firms	Homogeneous or Differentiated	High	Some price control	Automobile industry, telecommunications
Monopoly	Single firm	Unique	Extremely high	Significant price control	Public utilities, patented drugs

Summary and Key Takeaways

Market structures are defined by the number of firms, product types, and barriers to entry.
Perfect competition and monopolistic competition feature many firms with low entry barriers, while oligopolies and monopolies have fewer firms with high barriers.
Product differentiation and strategic behaviors like game theory are crucial in oligopolistic and monopolistic markets.
Barriers to entry significantly influence the competitiveness and efficiency of markets.
Understanding market structures aids in analyzing economic policies and business strategies.

Examiner Tip

Tips

Use the mnemonic "N-P-B" to remember the key attributes of market structures: Number of Firms, Product Type, and Barriers to Entry. When studying, create flashcards for each market structure with their characteristics and examples to reinforce your understanding and aid in quick recall during exams.

Did You Know

In the early 20th century, the term "oligopoly" was popularized after the formation of the Standard Oil Trust, which controlled about 90% of the oil refining industry in the United States. Additionally, many modern tech giants like Google and Facebook exhibit monopoly-like characteristics due to their dominant market positions and high barriers to entry.

Common Mistakes

Students often confuse monopolistic competition with monopoly, assuming that differentiation always leads to a monopoly. Another common error is underestimating the impact of barriers to entry, leading to incorrect assumptions about market competitiveness. For example, thinking that a few dominant firms necessarily indicate an oligopoly without considering product types and entry barriers.

FAQ

What distinguishes an oligopoly from monopolistic competition?

An oligopoly consists of a few large firms with significant market power and high barriers to entry, whereas monopolistic competition features many firms with differentiated products and low entry barriers.

Can a market structure change over time?

Yes, market structures can evolve due to factors like technological advancements, changes in consumer preferences, and shifts in regulatory policies, which can alter the number of firms, product types, and barriers to entry.

How do barriers to entry affect consumer choice?

High barriers to entry can limit the number of firms in the market, reducing competition and potentially limiting consumer choice. Conversely, low barriers enhance competition, offering more variety and better prices for consumers.

Why do monopolies often result in higher prices?

Monopolies have significant control over pricing due to the lack of competition. They set prices above marginal cost to maximize profits, which can lead to higher prices for consumers.

What role does product differentiation play in monopolistic competition?

Product differentiation allows firms in monopolistic competition to distinguish their products from competitors, giving them some control over pricing and fostering consumer loyalty.

Is perfect competition achievable in the real world?

Perfect competition is a theoretical market structure with ideal conditions like numerous firms, homogeneous products, and no barriers to entry. While rare in reality, some markets, such as certain agricultural markets, approximate perfect competition.

1. The price system and the microeconomy

1.1 Types of cost, revenue and profit, short-run and long-run production

1.1.1 Short-run cost function: TC, AC, MC, TFC, TVC, AFC, AVC

1.1.2 Long-run production and returns to scale

1.1.3 Long-run cost curve and minimum efficient scale

1.1.4 Economies and diseconomies of scale

1.1.5 Revenue definitions and calculation: TR, AR, MR

1.1.6 Normal, subnormal and supernormal profit

1.1.7 Short-run production function and law of diminishing returns

1.2 Different market structures

1.2.1 Market types: perfect, monopoly, monopolistic, oligopoly, natural monopoly

1.2.2 Structure: number of firms, product type, barriers to entry

1.2.3 Performance in different markets: revenues, output, profit, supply curve, efficiency

1.2.4 Oligopoly: collusion, price/non-price competition, Prisoner's Dilemma

1.2.5 Concentration ratio

1.3 Growth and survival of firms

1.3.1 Reasons for different firm sizes

1.3.2 Internal and external growth: horizontal, vertical, conglomerate

1.3.3 Cartels and their consequences

1.3.4 Principal–agent problem

1.4 Differing objectives and policies of firms

1.4.1 Profit-maximisation and alternative objectives

1.4.2 Price discrimination: types, conditions, consequences

1.4.3 Other pricing policies: limit, predatory, price leadership

1.4.4 PED and firm revenue in different demand curves

1.5 Utility

1.5.1 Definition and calculation of total and marginal utility

1.5.2 Diminishing marginal utility

1.5.3 Equi-marginal principle

1.5.4 Derivation of individual demand curve

1.5.5 Limitations of marginal utility theory

1.6 Indifference curves and budget lines

1.6.1 Meaning of indifference curve and budget line

1.6.2 Causes of shifts in budget line

1.6.3 Income, substitution, and price effects

1.6.4 Limitations of indifference curve model

1.7 Efficiency and market failure

1.7.1 Productive and allocative efficiency

1.7.2 Pareto optimality and dynamic efficiency

1.7.3 Definition and causes of market failure

1.8 Private costs and benefits, externalities and social costs and benefits

1.8.1 Calculation of social, private and external costs and benefits

1.8.2 Positive and negative externalities in consumption and production

1.8.3 Deadweight welfare losses and asymmetric information

2. The Macroeconomy

2.1 Price stability

2.1.1 Consequences of inflation

2.1.2 Definition of inflation, deflation, disinflation

2.1.3 Measurement: CPI and difficulties

2.1.4 Nominal vs real values

2.1.5 Causes of inflation: cost-push and demand-pull

2.2 National income statistics

2.2.1 Meaning of national income

2.2.2 Measurement: GDP, GNI, NNI

2.2.3 Adjustment from market to basic prices

2.2.4 Adjustment from gross to net values

2.3 Circular flow of income

2.3.1 Circular flow in closed and open economies

2.3.2 Injections and leakages (multiplier not required)

2.3.3 Equilibrium and disequilibrium (no propensities)

2.4 Aggregate Demand and Aggregate Supply analysis

2.4.1 Definition and components of Aggregate Demand

2.4.2 Shape and shifts of AD curve

2.4.3 Definition and determinants of Aggregate Supply

2.4.4 Shape of AS in short run and long run

2.4.5 Shifts in AS in short and long run

2.4.6 Movement along vs shift in AD and AS

2.4.7 Establishing equilibrium in AD/AS model

2.4.8 Effects of AD/AS shifts on output, price level, and employment

2.5 Economic growth

2.5.1 Meaning and measurement of economic growth

2.5.2 Nominal vs real GDP growth

2.5.3 Causes and consequences of economic growth

2.6 Unemployment

2.6.1 Meaning and measures of unemployment

2.6.2 Causes and types: frictional, structural, cyclical, seasonal, technological

2.6.3 Consequences of unemployment

3. International economic issues

3.1 Relationship between countries at different levels of development

3.1.1 External debt: causes and consequences

3.1.2 Role of IMF and World Bank

3.1.3 International aid: forms, reasons, effects

3.1.4 Trade and investment

3.1.5 Multinational companies: definition, activities, consequences

3.1.6 Foreign Direct Investment: definition and consequences

3.2 Globalisation

3.2.1 Meaning, causes, and consequences of globalisation

3.2.2 Free trade area, customs union, monetary union, economic union

3.2.3 Trade creation and trade diversion

3.3 Policies to correct disequilibrium in the balance of payments

3.3.1 Balance of payments accounts: current, financial, and capital

3.3.2 Impact of fiscal, monetary, supply-side, protectionist and exchange rate policies

3.3.3 Expenditure-switching vs expenditure-reducing policies

3.4 Exchange rates

3.4.1 Measurement of exchange rates: nominal vs real

3.4.2 Trade-weighted exchange rates

3.4.3 Fixed and managed exchange rate determination

3.4.4 Revaluation vs devaluation of fixed exchange rate

3.4.5 Effects of exchange rate changes: Marshall-Lerner and J curve

3.5 Economic development

3.5.1 Classification by development and national income

3.5.2 Indicators of living standards and development: monetary, non-monetary, composite

3.5.3 Comparison of growth and living standards across countries and over time

3.6 Characteristics of countries at different levels of development

3.6.1 Population: birth/death rate, infant mortality, migration, urbanisation

3.6.2 Income distribution: Gini coefficient, Lorenz curve

3.6.3 Economic structure: employment sectors, trade patterns

4. The macroeconomy

4.1 Economic growth and sustainability

4.1.1 Positive and negative output gaps

4.1.2 Business (trade) cycle: phases, causes, stabilisers

4.1.3 Policies to promote economic growth and their effectiveness

4.1.4 Definition and effects of inclusive economic growth

4.1.5 Definition and effects of sustainable economic growth

4.1.6 Policies to mitigate impact of growth on environment

4.1.7 Actual vs potential growth

4.2 Employment/unemployment

4.2.1 Full employment: definition

4.2.2 Equilibrium and disequilibrium unemployment (including hysteresis)

4.2.3 Voluntary and involuntary unemployment

4.2.4 Natural rate of unemployment: definition, determinants, policy implications

4.2.5 Trends in employment and unemployment

4.2.6 Labour mobility: geographical and occupational

4.2.7 Policies to reduce unemployment and their effectiveness

4.3 Money and banking

4.3.1 Definition, functions, and characteristics of money

4.3.2 Definition of money supply and quantity theory of money (MV=PT)

4.3.3 Functions and objectives of commercial banks

4.3.4 Causes of changes in money supply in open economy

4.3.5 Credit creation, central bank role, government deficit financing, quantitative easing

4.3.6 Policies to reduce inflation and their effectiveness

4.3.7 Demand for money: liquidity preference theory

4.3.8 Interest rate determination: loanable funds and Keynesian theory

4.4 The circular flow of income

4.4.1 The multiplier: definition and calculation in different economies

4.4.2 Propensities: APS, MPS, APC, MPC, APM, MPM, ART, MRT

4.4.3 National income determination using AD and income approach

4.4.4 Effect of AD changes on national income using the multiplier

4.4.5 Components and determinants of AD: consumption, savings, investment, government spending, net export

4.4.6 Full employment and equilibrium level of national income

4.4.7 Inflationary and deflationary gaps

5. The price system and the microeconomy

5.1 Price elasticity of supply

5.1.1 Factors affecting PES

5.1.2 Implications for speed of response to market changes

5.1.3 Definition of PES

5.1.4 Formula and calculation of PES

5.1.5 Interpretation of PES coefficients

5.2 The interaction of demand and supply

5.2.1 Market equilibrium and disequilibrium

5.2.2 Shifts in demand and supply affecting equilibrium

5.2.3 Relationships between markets: complements, substitutes, derived demand, joint supply

5.2.4 Functions of price: rationing, signalling, incentivising

5.3 Consumer and producer surplus

5.3.1 Meaning and significance of consumer surplus

5.3.2 Meaning and significance of producer surplus

5.3.3 Causes of changes in consumer and producer surplus

5.3.4 Elasticity’s role in determining surplus changes

5.4 Demand and supply curves

5.4.1 Effective demand

5.4.2 Individual and market demand and supply

5.4.3 Determinants of demand

5.4.4 Determinants of supply

5.4.5 Causes of a shift in the demand curve

5.4.6 Causes of a shift in the supply curve

5.4.7 Shift vs movement along demand/supply curves

5.5 Price elasticity, income elasticity and cross elasticity of demand

5.5.1 Definitions of PED, YED, XED

5.5.2 Formulae and calculation of PED, YED, XED

5.5.3 Interpretation of elasticity coefficients

5.5.4 Types of elasticity: elastic, inelastic, unitary

5.5.5 Variation in PED along a straight-line demand curve

5.5.6 Factors affecting PED, YED, XED

5.5.7 Relationship between PED and total expenditure

5.5.8 Decision-making implications of PED, YED, XED

6. Government macroeconomic intervention

6.1 Government macroeconomic policy objectives

6.1.1 Using policy to achieve price stability, low unemployment, and economic growth

6.2 Fiscal policy

6.2.1 Meaning of government budget

6.2.2 Government budget deficit vs surplus

6.2.3 Meaning and significance of national debt

6.2.4 Types of taxes and tax rates

6.2.5 Reasons for taxation

6.2.6 Types and reasons for government spending

6.2.7 Expansionary vs contractionary fiscal policy

6.2.8 AD/AS analysis of fiscal policy impact

6.3 Monetary policy

6.3.1 Definition and tools of monetary policy

6.3.2 Expansionary vs contractionary monetary policy

6.3.3 AD/AS analysis of monetary policy impact

6.4 Supply-side policy

6.4.1 Meaning and objective of supply-side policy

6.4.2 Tools of supply-side policy

6.4.3 AD/AS analysis of supply-side policy impact

7. Basic economic ideas and resource allocation

7.1 Scarcity, choice and opportunity cost

7.1.1 Fundamental economic problem of scarcity

7.1.2 Need to make choices at all levels (individuals, firms, governments)

7.1.3 Nature and definition of opportunity cost, arising from choices

7.1.4 Basic questions of resource allocation: what, how, for whom

7.2 Economic methodology

7.2.1 Economics as a social science

7.2.2 Positive and normative statements

7.2.3 Meaning of the term ceteris paribus

7.2.4 Importance of the time period (short run, long run, very long run)

7.3 Factors of production

7.3.1 Definition of land, labour, capital and enterprise

7.3.2 Human capital vs physical capital

7.3.3 Rewards to the factors of production

7.3.4 Division of labour and specialisation

7.3.5 Role of the entrepreneur: risk and organisation

7.4 Resource allocation in different economic systems

7.4.1 Decision-making in market, planned and mixed economies

7.4.2 Resource allocation processes in different systems

7.5 Production possibility curves

7.5.1 Nature and meaning of a production possibility curve (PPC)

7.5.2 Shape of PPC: constant and increasing opportunity costs

7.5.3 Causes and consequences of shifts in a PPC

7.5.4 Significance of a position within a PPC

7.6 Classification of goods and services

7.6.1 Free goods and private goods (economic goods)

7.6.2 Public goods: nature and definition

7.6.3 Merit goods and under-consumption due to imperfect information

7.6.4 Demerit goods and over-consumption due to imperfect information

8. Government microeconomy intervention

8.1 Reasons for government intervention in markets

8.1.1 Addressing the non-provision of public goods

8.1.2 Addressing over-consumption of demerit goods and under-consumption of merit goods

8.1.3 Controlling prices in markets

8.2 Methods and effects of government intervention in markets

8.2.1 Impact and incidence of specific indirect taxes

8.2.2 Impact and incidence of subsidies

8.2.3 Direct provision of goods and services

8.2.4 Maximum and minimum prices

8.2.5 Buffer stock schemes

8.2.6 Provision of information

8.3 Addressing income and wealth inequality

8.3.1 Difference between income as a flow and wealth as a stock

8.3.2 Measuring inequality: Gini coefficient

8.3.3 Economic reasons for income and wealth inequality

8.3.4 Policies to redistribute income and wealth: minimum wage, transfer payments, progressive taxes, stat

9. International economic issues

9.1 The reasons for international trade

9.1.1 Absolute vs comparative advantage

9.1.2 Benefits of specialisation and free trade

9.1.3 Terms of trade: measurement, causes, impact

9.1.4 Limitations of trade theories

9.2 Protectionism

9.2.1 Meaning and context of protectionism

9.2.2 Tools of protection: tariffs, quotas, subsidies, embargoes, red tape

9.2.3 Arguments for and against protectionism

9.3 Current account of the balance of payments

9.3.1 Components of the current account

9.3.2 Calculation of trade balances and CAB

9.3.3 Causes and consequences of imbalances

9.4 Exchange rates

9.4.1 Definition and determination of floating exchange rates

9.4.2 Depreciation vs appreciation of exchange rates

9.4.3 Causes of exchange rate changes

9.4.4 Impact of exchange rate changes using AD/AS

9.5 Policies to correct imbalances in the current account

9.5.1 Objective of stability in current account

9.5.2 Use of fiscal, monetary, supply-side and protectionist policies

10. Government microeconomic intervention

10.1 Government policies to achieve efficient resource allocation and correct market failure

10.1.1 Application and effectiveness of taxes and subsidies

10.1.2 Use of price controls and production quotas

10.1.3 Prohibitions, licences, and direct provision

10.1.4 Pollution permits and property rights

10.1.5 Nationalisation and privatisation

10.1.6 Provision of information and behavioural insights

10.1.7 Definition, causes and consequences of government failure

10.2 Equity and redistribution of income and wealth

10.2.1 Equity vs equality

10.2.2 Equity vs efficiency

10.2.3 Absolute vs relative poverty

10.2.4 Poverty trap

10.2.5 Policies: negative income tax, universal and means-tested benefits, basic income

10.3 Labour market forces and government intervention

10.3.1 Derived demand and factors affecting labour demand

10.3.2 Shifts vs movement along labour demand curve

10.3.3 Marginal revenue product and labour demand

10.3.4 Factors affecting labour supply: wage and non-wage

10.3.5 Shifts vs movement along labour supply curve

10.3.6 Wage determination in perfect labour markets

10.3.7 Imperfect markets: trade unions, minimum wage, monopsony

10.3.8 Wage differentials from market forces

10.3.9 Transfer earnings and economic rent

11. Government macroeconomic intervention

11.1 Government macroeconomic policy objectives

11.1.1 Objectives: inflation, BoP, unemployment, growth, development, sustainability, redistribution

11.2 Links between macroeconomic problems and their interrelatedness

11.2.1 Internal vs external value of money

11.2.2 Balance of payments and inflation

11.2.3 Growth and inflation

11.2.4 Growth and balance of payments

11.2.5 Inflation and unemployment: traditional and expectations-augmented Phillips curve

11.3 Effectiveness of policy options to meet all macroeconomic objectives

11.3.1 Fiscal, monetary, supply-side, exchange rate and trade policies

11.3.2 Policy conflicts and problems

11.3.3 Macroeconomic government failure

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Structure: Number of Firms, Product Type, Barriers to Entry

Introduction

Key Concepts

1. Overview of Market Structures

2. Perfect Competition

3. Monopolistic Competition

4. Oligopoly

5. Monopoly

6. Summary of Market Structures

Advanced Concepts

1. Game Theory in Oligopolies

2. Price Discrimination in Monopolies

3. Barriers to Entry and Market Dynamics

4. Product Differentiation and Consumer Choice

5. Innovation and Market Structure

6. Economies of Scale and Market Structure

Comparison Table

Summary and Key Takeaways

Coming Soon!

Tips

Did You Know

Common Mistakes

FAQ