James Osborne
There are different kinds of characteristics within an economy, these are called market
structures. There are four basic market structures; oligopoly, perfect competition,
monopoly, monopolistic competition. Each of these all have their own characteristics which
influence a business and what decisions they make. They also influence the profits a
business makes.
An Oligopoly is a market structure where a small amount of businesses dominates that
market. This results in competition being limited and means that the businesses can either
work with each other or compete. By doing either one of these the businesses can use their
combined power in the market to increase prices and overall earn more profit. The
characteristics of an Oligopoly market structure are:
Entering and exiting the market is restricted by barriers
Prices can be set by Oligopolies
All businesses inside an Oligopoly maximise profits
Products can be similar or different
There are a select few businesses that are part of the Oligopoly
Oligopolies tend to consist of around five businesses and these are the more dominant
businesses. An example of an Oligopoly in the UK are the main supermarkets such as Tesco,
Asda, Sainsbury’s, Morrison’s, Aldi. These businesses have a lot of power in the market and
tend to compete with one another of work together to dominate the market.
A Perfect Competition is a market structure in which a large amount of small businesses
competes against one another. In this market, not one business has a substantial amount of
power in the market. Because of this, the market overall produces a similar level of output
with similar prices due to none of the businesses having any influence on the prices in the
market. The characteristics of a Perfect Competition market structure are:
All the businesses within the market maximise their profits
It is free to enter and exit the market with ease
All the products and services sold in the marker are very similar if not identical
In the market, consumer preferences do not exist
In an ideal world, it is very uncommon to find a Perfect Competition market but it is an
important market structure because it is the only one in which none of the businesses can
influence the power within the market. An example of a perfect competition market is the
stock market.
A Monopoly is a market structure where only one business has control of the entire market.
In this market structure a business has the most amount of power in the market which
means that consumers therefore have no options for alternatives. This furthermore means
that the monopoly business generally reduces its total output but increases its prices so that
it can earn more profit. The characteristics of a Monopoly market structure are:
The Monopoly business maximises its profit
It is hard for a business to enter the market due to the higher barriers
The Monopoly business can set the price
There is only one business in the market that dominates it
In general, most Monopoly businesses are not viewed upon in a positive way. This is
because they generally reduce output but increase price to maximise profits when
compared to markets that are competitive. Because of this it is common for the
There are different kinds of characteristics within an economy, these are called market
structures. There are four basic market structures; oligopoly, perfect competition,
monopoly, monopolistic competition. Each of these all have their own characteristics which
influence a business and what decisions they make. They also influence the profits a
business makes.
An Oligopoly is a market structure where a small amount of businesses dominates that
market. This results in competition being limited and means that the businesses can either
work with each other or compete. By doing either one of these the businesses can use their
combined power in the market to increase prices and overall earn more profit. The
characteristics of an Oligopoly market structure are:
Entering and exiting the market is restricted by barriers
Prices can be set by Oligopolies
All businesses inside an Oligopoly maximise profits
Products can be similar or different
There are a select few businesses that are part of the Oligopoly
Oligopolies tend to consist of around five businesses and these are the more dominant
businesses. An example of an Oligopoly in the UK are the main supermarkets such as Tesco,
Asda, Sainsbury’s, Morrison’s, Aldi. These businesses have a lot of power in the market and
tend to compete with one another of work together to dominate the market.
A Perfect Competition is a market structure in which a large amount of small businesses
competes against one another. In this market, not one business has a substantial amount of
power in the market. Because of this, the market overall produces a similar level of output
with similar prices due to none of the businesses having any influence on the prices in the
market. The characteristics of a Perfect Competition market structure are:
All the businesses within the market maximise their profits
It is free to enter and exit the market with ease
All the products and services sold in the marker are very similar if not identical
In the market, consumer preferences do not exist
In an ideal world, it is very uncommon to find a Perfect Competition market but it is an
important market structure because it is the only one in which none of the businesses can
influence the power within the market. An example of a perfect competition market is the
stock market.
A Monopoly is a market structure where only one business has control of the entire market.
In this market structure a business has the most amount of power in the market which
means that consumers therefore have no options for alternatives. This furthermore means
that the monopoly business generally reduces its total output but increases its prices so that
it can earn more profit. The characteristics of a Monopoly market structure are:
The Monopoly business maximises its profit
It is hard for a business to enter the market due to the higher barriers
The Monopoly business can set the price
There is only one business in the market that dominates it
In general, most Monopoly businesses are not viewed upon in a positive way. This is
because they generally reduce output but increase price to maximise profits when
compared to markets that are competitive. Because of this it is common for the
