Key Summary on Market Structures
- Levels: AS, A Level
- Exam boards: AQA, Edexcel, OCR, IB, Other, Pre-U
Market structure is best defined as the organisational and other characteristics of a market. We focus on those characteristics which affect the nature of competition and pricing – but it is important not to place too much emphasis simply on the market share of the existing firms in an industry.
Traditionally, the most important features of market structure are:
- The number of firms (including the scale and extent of foreign competition)
- The market share of the largest firms (measured by the concentration ratio – see below)
- The nature of costs (including the potential for firms to exploit economies of scale and also the presence of sunk costs which affects market contestability in the long term)
- The degree to which the industry is vertically integrated - vertical integration explains the process by which different stages in production and distribution of a product are under the ownership and control of a single enterprise. A good example of vertical integration is the oil industry, where the major oil companies own the rights to extract from oilfields, they run a fleet of tankers, operate refineries and have control of sales at their own filling stations.
- The extent of product differentiation (which affects cross-price elasticity of demand)
- The structure of buyers in the industry (including the possibility of monopsony power)
- The turnover of customers (sometimes known as "market churn") – i.e. how many customers are prepared to switch their supplier over a given time period when market conditions change. The rate of customer churn is affected by the degree of consumer or brand loyalty and the influence of persuasive advertising and marketing
You Might Also Like
1st December 2016
6th November 2016
30th October 2016
26th October 2016
7th October 2016
2nd October 2016
30th September 2016
18th September 2016
10th September 2016
More From the Digital Store
A superb set of key topic lesson worksheets & answers for the Year 2 teaching content of AQA A Level Economics, including a series of synoptic worksheets to help linear revision.
Topic-by-topic, editable PowerPoints covering all the teaching content for Edexcel A Level Economics A.
Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.