VIII. Market structures

• Factors determining a market structure: (1) the number of firms selling in the market;(2) the extent to which the products of different firms in the market are the same or different; (3) the ease with which firms can enter into or exit from the market.

• Barriers to entry that prevent new firms from entering an industry are (1) ownership of an essential resource, (2) legal barriers, and (3) economies of scale. Government franchises, licenses, patents, and copyrights are the most obvious legal barriers to entry.

• Non-price competition refers to competition among firms that choose to distinguish their product via non-price means: style, delivery, location, atmosphere, promotions, etc.

• Market structures:

Oligopoly is a market structure characterized by a few sellers, standardized or differentiated products and substantial non-price competition.

Monopoly is a market structure characterized by a single seller, a product for which there are no close substitutes, and strong barriers to entry that prevent potential competitors from entering into the market.

Pure competition is a market structure characterized by many sellers, standardized products, easy entry and exit, and no artificial restrictions on the free movement of prices and wages up and down.

Monopolistic competition is a market structure characterized by many sellers, differentiated products, non-price competition, and relatively easy entry and exit.

• Pricing strategies:

Cost-plus pricing, you look at the cost of what you sell–that is, the total marginal cost–then add on the profit you need to make. That’s your price. Cost-plus means “cost plus profit”.

Competitive pricing strategy aims to price the product at the lowest price among all recognized competitor.

Value pricing strategy. In this strategy, you deliver as much value as possible to your customers – and charge them for it. With this strategy, you charge a high price and justify it by delivering high value.

IX. Market leaders, challengers, followers

Market leader is the firm with the largest market share.

Challenger is a company with the second-largest market share.

Followers present no threat to the leader and concentrate on market segmentation.

X. Gross Domestic Product and other measures of income

* Gross domestic product (GDP) is the market value of all final goods and services produced within a country in a given period of time.

* GDP deflator a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.

* Nominal GDP is the value of all final goods based on the prices existing during the time period of production.

* Real GDP is the value of all final goods produced during a given time period based on the prices existing in a selected base year.

* Gross national product (GNP) is the total income earned by a nation’s permanent residents (called nationals). It differs from GDP by including income that our citizens earn abroad and excluding income that foreigners earn here.

* Net national product (NNP) is the total income of a nation’s residents (GNP) minus losses from depreciation.

* National income is the total income earned by a nation’s residents in the production of goods and services.

* Personal income is the income that households and non-corporate businesses receive.

* Disposable personal income is the income that households and non-corporate businesses have left after satisfying all their obligations to the government.

* Depreciation is the wear and tear on the economy's stock of equipment and structures.