Market Structure_Applied Economics, SHS Applied Subjectweek5.pptx

Applied Economics subject

1. Market Structures Pretzel L. Ragonjan

2. Learning Competency 7/1/20XX Pitch deck title 2 Differentiate various market structures in terms of: a. number of sellers, t b. types of products, c. entry/exit to market, d. pricing power, e. others

3. DIFFERENT MARKET STRUCTURES 3

4. Flower Auction Holland Five days a week in a huge building 10 miles outside of Amsterdam, some 2,000 buyers gather to participate in Flower Auction Holland. At this auction, more than 19 million flowers and 2 million plants from 5,000 growers around the globe are auctioned off each day. The auction is held in the world’s largest commercial building, and it is spread across the equivalent of 100 football fields. Flowers are grouped and auctioned off by type--- long-stemmed roses, tulips, and so on. Hundreds of buyers sit in the theatre settings with their fingers on buttons. Once the flowers are presented, a clocklike instrument starts ticking off descending prices until a buyer stops it by pushing a button. The winning bidder gets to choose how many and which items to take. The clock starts again until another buyer stops it, and so on, until all flowers are sold. Buyers also can bid from remote locations. Flower auctions occur swiftly—on average one transaction occurs every four seconds. This is an example of a Dutch auction, which stars at a high price and works down. Dutch auctions are common where multiple lots of similar, though not identical, items are sold, such as flowers in Amsterdam, tobacco in Canada, and fish in seaports around the world. Is the Flower Auction Holland a perfect example of a perfectly competitive market? Why or why not?

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6. What Are Market Structures? 7/1/20XX Pitch deck title 6 Business entities comprise also an economy. In the economy, firms differ from one another on how to allocate their resources to produce the products and how to deliver them to the consumers. They have to plan how to meet the demands of the consumers and participate in the market . When a firm enters the market world, it has to decide for the ideal market structure in order stay longer in the industry. Take note that, to assess the business environments, is a big help to remain competitive in the market. Let’s get to know about the different market structures. In the article of AU Online (2017), A Guide to Types of Market Structures, it defined market structure as a starting point for assessing economic environments of firms. It also mentioned market structure as a tool of understanding of how companies and markets work allows business professionals and leaders to accurately judge industry and market news, policy changes and legislation and how the economy shapes important decisions

7. PRODUCT BENEFITS Simple and quick to build Creates spaces for community interactions Reduces carbon footprint 7/1/20XX Pitch deck title 7

8. Perfect Competition Market structures have elements that are organized, and oftentimes institutionally regulated; such as system impacts pricing and distribution. The term market structure describes the important characteristics, or features, of a market. The first market structure to consider is perfect competition . Perfectly competitive markets are assumed to have the following features: There are many buyers and sellers- so many that each buys or sells only a tiny fraction of the total market output. This assumption ensures that no individual buyer or seller can influence the price. 2. Firms produce a standardized product, or a commodity . A commodity is a product that is identical across suppliers, such as a sack of wheat, a sack of corn, or a share of company stock. Because all suppliers offer an identical product, no buyer is willing to pay more for one particular suppliers' product. 3. Buyers are fully informed about the price, quality, and availability of products, and sellers are fully informed about the availability of all resources and technology. 4. Firm can easily enter or leave the industry. There are no obstacles preventing new firms from entering profitable markets or preventing existing firms from leaving unprofitable markets.

9. If these conditions exist in a market, individual buyers and sellers have no control over the price. Price is determined by market demand and market supply . Once the market establishes the price, each firm is free to supply whatever quantity maximizes its profit or minimizes its loss. A perfectly competitive firm is so small relative to the size of the market that the firm’s quantity decision has no effect on the market price. Any profit in this market attracts new firms in the long run, which increases the market supply. This reduces the market price. The lower price drives down the profit in this market.

10. Examples of Perfectly Competitive Markets Examples of perfect competition includes markets for the shares of large corporations such telecommunication, food and beverages; markets for foreign exchange, such as Yen, Euros, and Pounds; and markets for most agricultural products, such as livestock, corn, and wheat. In these markets, there are so many buyers and sellers that the actions of anyone cannot influence the market price. In the perfectly competitive market for coconuts, for example, an individual supplier is a coconut farm. In the world market for coconuts, there are tens of thousands of coconut farms, so anyone supplies just a tiny fraction of market output. For example, the Philippine exports more than $1 billion worth of coconut products to the United States, But no single coconut farmer can influence the market price of coconuts. Any farmer is free to supply any amount he or she wants to supply at the market price. What are the features of perfect competition A perfectly competitive market has the following characteristics: • There are many buyers and sellers in the market. • Each company makes a similar product. • Buyers and sellers have access to perfect information about price. • There are no transaction costs. • There are no barriers to entry into or exit from the market.

11. RESEARCH We based our research on market trends and commercial sales DESIGN We believe people need energy efficient buildings ABSTRACT Minimalist design and easy to build 7/1/20XX Pitch deck title 12

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13. Economies of Scale A monopoly sometimes emerges naturally when a firm experiences substantial economies of scale. A single firm can sometimes satisfy market demand at a lower average cost per unit than two or more small firms. Put another way, market demand is not great enough to allow more than one firm to achieve sufficient economies of scale. For example, the transmission of electricity involves economies of scale. Once wires are run throughout a community, the cost of linking additional households to the power grid is relatively small. The cost per household declines as more and more households are wired into the system. A monopoly that emerges due to the nature of costs is called a natural monopoly . A new entrant cannot sell enough output to experience the economies of scale enjoyed by an established natural monopolist. Therefore, entry into the market is naturally blocked. In less-populated areas, natural monopolies include the only grocery store, movie theatre, or restaurant for miles around. These are geographic monopolies for products sold in local markets.

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15. $3B Opportunity to build Fully inclusive market Total addressable market $2B Freedom to invent Selectively inclusive market Serviceable available market $1B Few competitors Specifically targeted market Serviceable obtainable market MC- Marginal Cost, -cost incurred by a firm when production increases MR- Marginal Revenue – a firm receives by producing an extra unit of output

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19. OPPORTUNITY TO BUILD Addressable market FREEDOM TO INVENT Serviceable market FEW COMPETITORS Obtainable market 7/1/20XX 20

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23. REMEMBER 7/1/20XX 24 There are different market structures that can characterize an economy: perfect competition, monopolistic competition, oligopoly, and monopoly. Each of them has its own set of characteristics, which in turn affects the decision making of firms and the profits they can make. In perfect competition , it is assumed that: (1) all firms maximize profits (2) there is free entry and exit to the market, (3) all firms sell completely identical (i.e., homogenous) goods, (4) there are no consumer preferences In monopolistic competition , it is assumed that: (1) all firms maximize profits ( 2) there is free entry, and exit to the market; (3) firms sell differentiated products (4) consumers prefer one product over the other. Oligopoly structure of the market assumed that: (1) all firms maximize profits, (2) oligopolies can set prices, (3) there are barriers to entry and exit in the market, (4) products may be homogenous or differentiated, and (5) only a few large firms that dominate the market, and finally The following assumptions are made for monopolies : (1) the monopolist maximizes profit, (2) it can set the price, (3) there are high barriers to entry and exit, (4) there is only one firm that dominates the entire market.

24. Activities List down in your notebook at least 3 industries, companies or supplier that belong to the different type of market structure: Monopoly, Perfect competition, Oligopoly and monopolistic competition and give the features that make such company belong to that certain market feature 7/1/20XX Pitch deck title 25 Suppose you are to have your business in the future, which market structure would you prefer your business to fall? Why? If you are to enter the business industry and choose to be on a perfect competition market structure, what product will you sell and why?

25. THANK YOU 7/1/20XX Pitch deck title 26