2. 1.Competition
1.1Definition
In a market with perfect competition, there are many
companies supplying the same good or services, but
none of them are able to control the price.
1.2The laws of supply and demand
In perfect competition, these laws set the price not the
company
3. 1.3.Conditions
1.There must be many small companies competing .
Each company has its own equal small share of the
market .
2. Products & services from different companies must
be the same
3. Customers and companies must have perfect and
complete information.
4.There mustn’t be any barriers to the new companies
entering the market.
5. Every company in the market must have the same
access to the resources & teachnology they need.
4. 1.4.Benefits and drawbacks
Benefits Drawbacks
1. Because there is perfect
knowledge, there is no
information failure and
knowledge is shared evenly
between all participants.
2. There are no barriers to
entry, so existing firms
cannot derive any monopoly
power.
3. There is no need to spend
money on advertising
1. profits will be lower
compared in markets than
monopoly power
2. No Scope for economies of
scale because of the high
number of firms in there
5. II.MONOPOLY
2.1.Definition: A monopoly means that one
company has a much larger market share than any
other company.
2.2.The laws of supply and demand: In
monopoly, the normal laws of supply and demand do
not always work.
7. A pure monopoly
What is a pure monopoly?
A pure monopoly means when there is only one
company in the market providing a particular
product or service.
When does it occur?
It happens when a company creates an economy of
scale. An economy of scale is when variable costs of
production increase more slowly than increases in
supply.
8. A legal monopoly
What is a legal monopoly?
A legal monopoly means that it is created by law.
When does it occur?
It occurs when the government makes it happen.
The government may decide that a competitive
market is not good for a certain industry and it can
make one company be the only legal supplier.
9. A state monopoly
What is a state monopoly?
A state monopoly means that it provides the service
itself.
The postal service is a typical example for this one.
10. 2.4The way to creat a
monopoly
-The world of business is a jungle ,and
there are more aggressive way to
creat a monopoly .One of these is by
making takeovers
11. TAKEOVERS
• This means that a more powerful
company buys a smaller one in the same
industry .
• Takeovers happen vertically or
horizontally .
12. Vertically takeovers
• In a vertically takeovers ,a company buys
companies that supply it with materials or
services .
• For example
A publishing company might buy a printing
business.
13. Horizontal takeovers
• In a horizontal takeovers ,a company buys its
competitor ,the competitor become part of
the first company.
15. Drawbacks of Monopolies.
• Monopolies are not good for consumer .This is
because in a monopoly ,the laws of supply
and demand do not work in the same way.
• A company with a monopoly become a price
maker .They have much more power to set the
price for their product or service .Also ,they
don’t usually spend money on innovation
because they don’t need to. Monopolies
mean less choice fore consumers.
16. 3.The differences between
competition and monopolies
Competion Monopolies
Definition In a market with perfect
competition, there are
many companies supplying
the same good or services,
but none of them are able
to control the price
A monopoly means that
one company has a much
larger market share than
any other company.
The laws of supply and
demand
In perfect competition,
these laws set the price not
the company
In monopoly, the normal
laws of supply and demand
do not always work.
How to create 5 conditions 2 ways: vertical takeovers
or horizontally takeovers
