Economics CPD Courses Coming up this Term!- Book Your Places Now!
This blog links to an updated revision presentation on the economics of contestable markets.
* For a contestable market to exist there must be low barriers to entry and exit so that new suppliers can come into a market to provide fresh competition.
* For a perfectly contestable market, entry into and exit out must be costless
* No market is perfectly contestable but virtually every market is contestable to some degree even when it appears that the monopoly position of a dominant seller is unassailable.
* This can have implications for the behaviour (conduct) of existing firms and then affects the performance of a market in terms of allocative, productive and dynamic efficiency.
* A contestable or competitive environment is common in most industries
Contestable markets are different from perfect competitive markets. For example, it is feasible in a contestable market for one firm to have price-setting power and for firms in a market to produce a differentiated product.
There are three main conditions for pure market contestability:
o Perfect information and the ability and/or the right of all suppliers to make use of the best available production technology in the market.
o The freedom to market / advertise and enter a market with a competing product.
o The absence of sunk costs – this reduces the risks of coming into a market.
Sunk costs – a barrier to contestability
Barriers to market contestability exist when there are sunk costs. These are costs that have been committed by a business cannot be recovered once a firm has entered the industry.
FOR MORE REVISION SUPPORT FROM THE TUTOR2U TEAM...
Use the following class codes to join our Zondle revision classes:
Economics: AS Micro 290-66327 AS Macro 290-66328 A2 Micro 290-66329 A2 Macro 290-66330
AQA AS/A2 Business: BUSS1 290-66325 BUSS2 290-66326 BUSS3 290-66323 BUSS4 290-66322
Economics CPD Courses in June 2014 - Book Your Places Now!
|PowerPoint Lesson Activities||Teacher Conferences & CPD Courses|
|Exam Coaching & Revision Workshops||Pre-release Case Study Toolkits|
|A Level Economics Teaching Support||Resources for Business Studies|