Market Structure
（Ⅰ） Market and Market Structure Perfectly Competitive Markets Adjustment from Market and Government to Industry in Perfectly Competitive Markets
中文版
Contents
Market and Market Structure
Perfectly Competitive Markets Market Structure Imperfectly Competitive Markets Monopolistic Competition Oligopoly
Monopoly
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Market and Market Structure
Market, Firm, Industry The Standard of Dividing Market Structure
Number of producers Degree of product differentiation Firm' s degree of control over price The difficult or easy degree of firms entering
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Market and Market Structure
Main types
Perfectly completive market
Definition Perfect completion exists only in the case where no firm is a big enough part of the total market to have any personal influence on market price. Characteristic Many producers Identical products Free entry Symmetric information. e.g. Agricultural product market
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Market and Market Structure
Main types
Monopolistic competition
Definition Monopolistic competition occurs when a large number of sellers produce differentiated products. Characteristic Products are different Many producers Entry and exit are easy Many product groups e.g. Light industry sector
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Market and Market Structure
Main types
Oligopoly
Definition Oligopoly means “ few sellers ”.Few can be a number as small as 2 or as large as 10 or 15 firms. Characteristic Few producers Dependent each other Barriers to entry are high Each individual firm can affect the market price. e.g. Heavy industry sector ,such as petrol,iron and steel ,cars etc .
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Market and Market Structure
Main types
Monopoly
Definition A single seller completely controls over an industry. Characteristic Firm is industry No close substitute Price-maker Price discrimination . e.g. Local electricity and water utilities.
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Perfectly Competitive Markets
Basic Assumptions
Many producers Identical products Free entry Symmetric information
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Perfectly Competitive Markets
Demand Curve And Law of Revenue
Demand Curve Looks Horizontal to a Perfect Competitor
P
D E
S
P
dd （AR=MR=Pe）
Pe O
Pe Q O
Q
b. Firm output
9
a. Industry output
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Perfectly Competitive Markets
Law of revenue Look at the above figure b，AR=MR=Pe， law of revenue is the following :
TR Pe Q AR TR Q Pe Q Q Pe
d (TR) d ( PQ) MR P dQ dQ
MR AR Pe
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Perfectly Competitive Markets
Firm Equilibrium
Short-run Equilibrium When MR=SMC , a perfect competitor can realize short-run equilibrium .
Get extra profit Extra profit is zero Loss is minimum Shutdown point
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Perfectly Competitive Markets
Get extra profit
CR STC B TR
H
A E FC O PCR a
QS
Q1 QT
Q
SMC
Pe C O
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D B QS Q1 QT
SAC dd Q
b
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Perfectly Competitive Markets
Extra profit is zero
PCR SMC SAC Pe’ E dd’
Point E is the zeroprofit point.
O
Q2
Q
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Perfectly Competitive Markets
Loss is minimum
PRC
MC AC L Pe1 M O
K
J H
AVC dd1
Q3
Q
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Perfectly Competitive Markets
Shutdown point
PRC
MC AC AVC
Pe2 W O
dd2
Q4
Q
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Perfectly Competitive Markets
Long-run Equilibrium
P P
D
S
E
LMC LAC
Pe
O
Qe a. Industry Equilibrium
Q
O
q0i
b. Firm Equilibrium
q
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Adjustment from Market and Government
Adjustment from Market
Definition
Adjustment from market means how to adjust market supply and demand in order to establish equilibrium price and equilibrium quantity .
Types
Leon Walras’ Price Adjustment Alfred Marshall’s quantity adjustment
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Adjustment from Market and Government
Leon Walras’ Price Adjustment Standpoint : Price is the motivation of market adjustment tendency to equilibrium ; the change of supply and demand is the reflection of price change.
P
S
Pe D
O
Qe
Q
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Adjustment from Market and Government
Alfred Marshall’s quantity adjustment
P
S
Pe
D
O Qe Q
Viewpoint: the adjustment of individual demand quantity and firm supply quantity is the reflection of supply and demand’s unbalance ; price changes as quantity does.
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Adjustment from Market and Government
Adjustment From Government
Tax Policy Effect Of Government Tax from the deal Total tax once The measures of government interference equilibrium price :support-price and ceilingprice . Evaluation about some economic policy from government
Evaluating standard:The change of welfare condition in the society .Use consumer surplus and producer surplus to measure it .Look at the following figure .
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Adjustment from Market and Government
CS and PS
P
A CS S
P0
E
B
PS
D Q0 Q
O
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Adjustment from Market and Government
Welfare Loss Of Price Regulation Price regulation means that government regulates the highest limited price .
P
Dead weight Pe A C S Pe Pmax D A
P
S
Pmax
B
B C
D
O
Q1
Qe
Q2
Q
O
Q1′ Qe
Q
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Adjustment from Market and Government
Welfare Loss Of Support -Price
P S
P S
Pmin
Pe A B C D O Q1
Pmin Pe
A
B C D G
Qe
Loss
Q of
O
Q1
Qe Q2
Q
Society Welfare Support-price
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Society Welfare Loss of Producer Excess
23
Adjustment from Market and Government
Welfare Loss Of Government Tax
P S Pd A B t
Pe
Ps
C
D
D
O Q1 Qe Q
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Market Structure
（Ⅰ）
The End