Competative and Concentrated Markets Definitions

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  1. Market Structure
    The organisation of a market in terms of the number of firms in the market and the way they behave
  2. Price Taker
    A firm which passively accepts the ruling market price set by the conditions outside its control
  3. Price Maker
    A firm possessing the power to set the price within the market
  4. Perfect Competition A market which displays the six conditions of:
    • - A large number of buyers and sellers
    • - Perfect market information
    • - The ability to buy or sell as much as desired at the market ruling price
    • - The inability of an individual buyer or seller to influence the market price
    • - A uniform or homogenous product
    • - No barriers to entry or exit in the long run
  5. 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.
  6. Concentrated Market
    A market containing very few firms
  7. Pure Monopoly
    When there is only one firm in the market
  8. Monopoly Power
    The power of the firm to act as a price maker rather than a price taker
  9. Imperfect Competition
    Any market structure lying between the extremes of perfect competition and pure monopoly
  10. Profit Maximisation
    Occurs when a firms total revenue is the furthest above total cos of production
  11. Sales Maximisation
    Occurs when sales revenue is maximised
  12. Market Share Maximisation
    Occurs when a firm maximises its percentage share of the market in which i sells its product
  13. Entry Barrier
    Makes it difficult or impossible for new firms to enter the market
  14. Exit Barrier
    Makes it difficult or impossible for new firms to leave the market
  15. Consumer Sovereignty
    Through exercising their spending power, consumers collectively determine what is produced in a market. Consumer sovereignty is strongest in a perfectly competitive market
  16. Producer Sovereignty
    Producers or firms in a market determine what is produced and what prices are charged
  17. Natural Monopoly The term has two meanings:
    • When a country or firm has complete control of a natural resource
    • When there is only one room in a market for one firm benefitting from economies of scale to the full
  18. Patent
    A strategic or man-made barrier to entry caused by govt legislation protecting the right of a firm to be the sole producer of a patented good unless the firm grants royalties for other firms to produce the goods.
  19. Natural Barrier to Entry
    A barrier to market entry which is not man-made
  20. Artificial Barrier to Entry
    A barrier to market entry which is man-made
  21. Informative Advertising
    Provides consumers and producers with useful inflation about goods or services
  22. Persuasive Advertising
    Attempts to persuade potential customers that a good or service possesses desirable characteristics that make it worth buying
  23. Saturation Advertising
    Through flooding the market with information and persuasion about a firm’s product. This can act as a man-made barrier to market entry because small forms cannot compete.
  24. Product Differentiation
    Making a product different through design, how it is made or through its functionality
  25. Concentration Ratio
    A ratio which indicates the total market share of a number of leading firms in a market, or the output of these firms as a percentage total output
  26. Oligopoly
    A market dominated by a few firms
  27. Resource Misallocation
    When resources are allocated in a way which does not maximise economic welfare
  28. Collusion
    Co-operation between forms, for example to fix price. Some forms of collusion may be in the public interest, for example, research and labour training schemes.
  29. Invention
    Creates new ideas for products and processes
  30. Innovation
    Converts the results of invention into marketable products or services
  31. Price Competition
    Reducing the price of a good or service to gains ales by making it more attractive to consumers.
  32. Limit Pricing
    Reducing the price of a good to just above the average cost to deter the entry of new firms into the market. Prices are set at levels which are likely to make it unprofitable for potential entrants who might consider coming into the market.
  33. Predatory Pricing
    Temporarily reducing the price of a good to below average cost to drive smaller firms or new entrants out of the market.

Card Set Information

Author:
Anonymous
ID:
318722
Filename:
Competative and Concentrated Markets Definitions
Updated:
2016-04-10 21:10:51
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Competative Concentrated Markets Definitions
Folders:
economics
Description:
Competative and Concentrated Markets Definitions
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