PRESENTED BY GROUP 8

CHAPTER 9:
Market Structure and Long-Run
Equilibrium
 INTRODUCTION
In this chapter, we analyze how changes in one industry affect
other industries. In particular, the ability of capital and labor to
move between two industries implies that the prices and
profits of one industry are related to prices and profits in
another.
 WHAT IS A
MARKET
STRUCTURE?
Market Structure refers to how different industries are
classified based on the nature of their competition. The
Market Structure is based on what influences the behavior
and outcomes of companies in a specific market.
 WHAT ARE THE FACTORS THAT
DETERMINE A MARKET STRUCTURE?

The Amount of Buyers

1
and Sellers

Ability to Negotiate 2

3 Degree of Concentration

How Different the

1
Products are

The Ease or Difficulty of

2
Market Entry and Exit
 BUYER STRUCTURE OF
THE INDUSTRY

TURNOVER OF CUSTOMERS

FACTORS
THAT CAN PRODUCT DIFFERENTIATION

HELP IN NATURE OF COSTS

UNDERSTANDING OF INPUTS

MARKET NUMBER OF PLAYERS

IN THE MARKET
STRUCTURE :
VERTICAL INTEGRATION IN
THE SAME INDUSTRY

LARGEST PLAYER’S
MARKET SHARE
LONG-RUN
..EQUILIBRIUM
Long-Run Equilibrium is a fundamental concept in
economics that illustrates the state of balance reached by
markets over extended periods of time. It is a a state in
which the forces of supply and demand have reached a
balance over an extended period of time.

When firms are in long-run equilibrium, economic profit is

zero (including the opportunity cost of capital), firms
break even, and price equals average cost.
“ COMPETITIVE INDUSTRIES,
SAMPLES AND INDUSTRY
BACKGROUND ”
COMPETITIVE
INDUSTRIES

Competitive Industries are sectors of the economy

characterized by the presence of multiple firms or businesses
that actively vie for market share, customers, and profitability.
 CHARACTERISTICS OF
COMPETITIVE INDUSTRIES:

MULTIPLE FIRMS SIMILAR OR SUBSTITUTE COMPETITION FOR

PRODUCTS MARKET SHARE

PROFIT-DRIVEN DYNAMIC PRICING BARRIERS TO ENTRY

AND EXIT
INDUSTRY
CLASSIFICATIONS
3

1
PERFECTLY COMPETITIVE MONOPOLISTICALLY
1 2 COMPETITIVE INDUSTRY
INDUSTRY

1
3 OLIGOPOLISTIC INDUSTRY 4 MONOPOLISTIC INDUSTRY
EXAMPLES AND INDUSTRY
BACKGROUNDS

Perfectly Monopolistically Oligopolistic Monopolistic

Competitive Competitive Industry Industry
Industry Industry

Example: Example: Example: Example:

Agriculture Fast Food Automotive Industry Local Utility
Companies
INDIFFERENCE PRINCIPLE
In the Role of Asset Mobility in Long-Run Equilibrium, an Analysis of Entry and Exit Forces

The economic idea known as the indifference principle postulates that in an equilibrium
over the long term, a mobile asset will not care where it is used.
Ex. of mobile assets: portable computers, phones, radios, surveying equipment,
vehicles and any other work related equipment held by staff outside the offices at
any time.

If we put it another way, it means that a mobile asset will yield the same amount of
revenue or profit no matter what industry or location it is used in.

One of the most important ideas in comprehending how markets and production
components eventually come to equilibrium is the principle of indifference. It draws
attention to how mobility helps to balance returns and profits among various economic
endeavors.
SITUATIONAL
BASIS
Applying long-run analysis to
the financial domain provides
insights into basic
relationships, most notably
the trade-off between risk
and return.
 ILLUSTRATION OF THE SITUATIONAL
BASIS - GRAPH ON THE BOARD

Assume that A and B, two professions, have educational and skill

requirements.

Let's say that the salary of P50,000 per year is currently offered by both
professions A and B.

Profession A started offering a higher wage of P60,000 per year.

As more people enter occupation A, wages in A are under pressure to

decline and return to P50,000 due to the increased labor supply in A. In
contrast, profession B experiences upward pressure on wages, pushing
them up to P50,000 due to the reduced labor supply.
MONOPOLY
MONOPOLY
“Competitive firms live in the worst
of all possible economic worlds,
monopoly firms live in the best.”

"Competition is not only the basis of

protection to the consumer, but is
the incentive to progress."
- John Maurice Clark
ATTRIBUTES THAT
PROTECT THEM FROM THE
FORCES OF COMPETITION:

• Monopolies produce a product or

service with no close substitutes.

• Monopolies have no rivals.

• Barriers to entry prevent other

firms from entering the industry
 Unique, Innovative, or Creative

KEY Temporary Protection

POINTS
REGARDING
Barriers to Entry
MONOPOLY:

Competition and Imitation

 Monopoly Profit

Pricing Formula
The formula (P - MC) / P = 1 / |elasticity|
KEY is mentioned, representing how a firm
sets its price relative to marginal cost
POINTS and elasticity of demand.

REGARDING
MONOPOLY: Duration of Above-Average Profit

Long-Run Outcome
EXAMPLES OF MONOPOLY:

MICROSOFT DE BEERS

STANDARD OIL AT & T GOOGLE

THANK YOU
FOR LISTENING !

PRESENTED BY GROUP 8:
Karyl Regie Valdez
Aleeya Sumandar
Harold Veloso
Christian Jay Virtudazo
Jared Tomampos