chapter  11
2 Pages

Introduction to markets

ByBonnie Nguyen, Andrew Wait

This part introduction presents an overview of the key concepts discussed in the subsequent chapters. The part outlines the fundamental tools necessary for a basic understanding of markets. It shows that alternative market structures result in different competitive environments and outcomes. An understanding of how different markets work is essential for both firms competing with each other and for policy makers wishing to influence market outcomes. This part provides four different types of markets: perfectly competitive markets, monopoly markets, monopolistically competitive markets and oligopoly markets. In these markets, there are many firms who differentiate themselves from each other by selling slightly different products. Depending on the market, there may or may not be product differentiation. The actions of the each firm in the market affects other firms, so firms have some power to set prices but their choices may be dictated by the actions of other firms in the market.