ASIAN BUSINESS CABLETOW COOPERATIVE ACADEMY, INC.

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BROADCASTING
MARIE MAHOGANY B. DALMAN
PROFESSOR:

SUBJECT: APPLIED ECONOMICS

LESSON NO.: 6

LESSON TITLE: VARIOUS MARKET STRUCTURES

INTRO DIALOGUE: Hello, dear learners. This is your Broadcasting Professor, Marie
Dalman. Welcome to another lesson in Applied Economics.

PREPARATION DIALOGUE: >Before we begin with our discussion, please do the following:

>Make sure that you are seated comfortably in front of the television
in a place where you will not be disturbed for the next 30 minutes.

>Prepare a pen and paper so you could take down notes.

>Prepare a glass of water near you so you could take a sip whenever
you feel thirsty.

>Listen well to prepare yourself for a quiz after this lesson.

OBJECTIVES: >After this lesson, you as learners should be able to:

>Differentiate various market structures.

>LESSON PROPER:

>Market structures are classified based on the following aspects: degree of competition, number of
firms, bargaining power of consumers, and barrier to entry.

>The degree of competition is driven by the number of competing firms in the industry.

>The higher the number of firms, the greater the degree of competition.

>The number of firms pertains to the actual number of competitors in the market.

>The bargaining power of consumers refers to the ability of consumers to influence market prices.

>A high bargaining power means that consumers are price makers.

>On the contrary, a low or no bargaining power implies that suppliers are price makers and that

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A TECHNICAL-VOCATIONAL INSTITUTION
2nd Floor Consuelo Bldg., Corrales Ave., Cag

Contact Nos.: (088) 881 1186; 0917 329 0494

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consumers are just price takers.

>A barrier to entry refers to the ease with which new firms can penetrate the industry.

>A high barrier to entry is characterized by high setup costs that require entrants to have a huge
amount of initial investment.

>This is observed in large-scale manufacturing where machineries and infrastructure need to be built.

>Another example is in the case of low-cost products that have to be produced and sold in high
volume in order to recover the investment.

>Another factor that contributes to a high barrier to entry is exclusivity of resource.

>For example, a new technology that is protected by copyright laws discourages competitors from
setting up business.

>Based on those criteria, different industries adopt one of the four main market structures.

>First is Perfect Competition.

>Perfect competition is described as a market structure where no single seller or buyer has power to
determine the price and the level of output in the market.

>Although buyers and sellers compete, they have equal influence since no one possesses market
power.

>In a perfectly competitive market, the absence of market power is attributed to many companies
supplying and buying the product.

>Due to the huge number of sellers and buyers, no one has a significant influence on the price and
quantity to be supplied to a huge market.

Types of Products (pop up)

>In addition, suppliers in a competitive market sell similar or undifferentiated product or service.

>Product differentiation is what makes your product or service stand out to your target market.

>It's how you distinguish what you sell from what your competitors do, and it increases brand loyalty,
sales, and growth. 

>For example, choosing an iPhone over an Android as the customer considers iPhone to be a status
symbol and believes that it has an easier interface as compared to Android.

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>When suppliers cannot differentiate their products from one another, consumers cannot develop
brand loyalty to the product.

>A seller that increases his price above the market may end up with no buyers since consumers can
shift to other sellers that are producing the similar product and selling it at a lower market price.

>On the other hand, a seller who tries to attract more buyers buy selling the product below the
market price may end up losing because its production cost has increased while his selling price has
declined.

>Because of this, no seller can benefit by deviating from the market price.

>Therefore, every seller is considered a price taker.

Entry/Exit to Market (pop up)

>A competitive market is also characterized by free entry and free exit.

>This means that there are no restrictions on the entry and exit of new companies or players.

>If the industry is profitable, new entrants can easily enter.

>In a perfect competition not a single seller or buyer can influence the determination of price in the
market.

>The constant competition among buyers and sellers lead to an efficient production where they
produce at the least cost.

Monopoly (pop up)

>Let’s move on to the next market structure – Monopoly.

>Monopoly is a market structure that has a single player that controls the market.

>In terms of competitiveness, a monopoly has no competition, making it the least competitive of the
four structures.

>Being the sole supplier of a good or service in the market means that the business is the price maker
and consumers have no bargaining power.

>Monopolies happen when there is exclusive ownership of a resource or idea.

>Having exclusivity guarantees no entrants to the market, which means barriers to entry are
extremely high.

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>If there is only one buyer in the market, the market is called monopsony.

>A monopoly is the exact opposite of perfect competition.

>A single seller or single buyer has great market power.

>As a single seller, a monopolist can set a lower output and a high price in the market that will
maximize his profit.

>On the other hand, as a single buyer, a monopsonist can set a higher output and low price that give
him the highest level of utility or satisfaction.

>Because there is only one seller in a monopoly, there is no competition in the production of a highly
differentiated product that the monopolist alone can produce.

>This results to him extracting huge profit in the market.

>This huge profit is not easily eliminated because there are no restrictions on the entry of potential
competitors.

>Since there are no competitors in the market, there is no incentive for the monopolist to be efficient
in the use of resources.

>However, the government can lower the market power of the monopolist by taxing its huge profit or
by limiting its pricing.

Oligopoly (pop up)

>Oligopoly, on the other hand, is a market structure characterized by few sellers producing similar
and differentiated products.

>Large scale cement and steel companies usually have the characteristics of firms in an oligopolistic
market.

>This type of structure is described as an imperfect competition since it has some elements of a
competitive market.

>Although there is competition among few sellers in the market, their competition is imperfect since
the excess or abnormal profit in the industry is only reduced but not eliminated.

>More than the competition among the few sellers, what is significant in the determination of price
and output in the industry is the way these few sellers interact with one another.

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Contact Nos.: (088) 881 1186; 0917 329 0494

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>Since there are only a few of them, they can ignore each other or cooperate with one another.

>If they decide on cooperating with one another, they may act as a monopoly and set the price that
will yield the highest profit for all of them.

> A cartel is an association of similar companies or businesses that have grouped together in order
to prevent competition and to control prices, and it is illegal in our country.

>Since this is not allowed, these few firms can also choose to react with one another by setting their
output that will maximize their profit based on the output decision of their competitors.

>They can also follow the behavior of the leader in the industry.

>The more dominant company will usually set the output that will maximize his profit.

>Once the output is set, the price is likewise determined.

>Followers will take this price and adjust their output accordingly.

>There is a high barrier to entry in an oligopolistic industry.

>This is driven by expensive set up cost.

Monopolistic Competition (pop up)

>Monopolistic competition is another example of imperfect competition.

>This market structure has the elements of both competitive and monopolistic markets.

>It is competitive because it has numerous sellers and buyers in the market that can freely enter and
leave the market.

>However, it has a monopolistic element since the product being sold in the market although similar
can be differentiated by the seller through various means of advertising and packaging.

>This product differentiation is accepted by buyers as they patronize a particular brand.

>Some of the products sold in a monopolistically competitive market are shampoos, soaps,
detergents, and various household items.

Market Structures and Implications for Entrepreneurs (pop up)

>An entrepreneur with limited resources and production capacity may place his business in a
perfectly competitive market.

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Contact Nos.: (088) 881 1186; 0917 329 0494

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>Entry is easy and for a small enterprise with limited resources it can easily move into a market.

>But the firm will be faced with numerous competitors, actual and potential that can limit the
profitability of the business.

>In the light of these limitations, a monopolistically competitive market can be explored.

>In this case, the business who can give the market a unique branding for its product can find a niche
and expand its market share.

>However, the firm should always be conscious of potential rivals who can easily enter the market.

Credits: (flash on screen)

1. Tullao, T. Jr. (2016). Applied Economics for A Progressive Philippines. Phoenix Publishing
House, Inc.

2. Boado, S. (2017). Applied Economics. DIWA Learning Systems Inc.

3. Cartel definition and meaning. (n.d.). Collins Dictionaries.

https://www.collinsdictionary.com/dictionary/english/cartel

ENDING DIALOGUE:

>That concludes this lesson in Applied Economics.

>Let me close with this quote,

>”If you compete with other it makes you better, if you compete with yourself it brings out the best of
you.” (Dr. Anil Kumar Sinha)
>Stay safe, stay healthy, and let your learning continue.

ASSESSMENT: Do a research on five companies in the Philippines. Identify which

industry they belong to. Then based on their market power, determine
the market structure they can be categorized in.

Name of Company Industry Market Structure

1.
2.
3.
4.

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A TECHNICAL-VOCATIONAL INSTITUTION
2nd Floor Consuelo Bldg., Corrales Ave., Cag

Contact Nos.: (088) 881 1186; 0917 329 0494

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5.
ANSWER KEY: ANSWERS VARY. 2 POINTS PER NUMBER. TOTAL: 10 POINTS

PREPARED BY: Marie Mahogany B. Dalman

REVIEWED BY: Dr. Soc Anthony M. Del Rosario