Comparing Market Structures

Type of Market	Perfect Competition	Monopolistic Competition	Oligopoly	Monopoly
Number of firms	Very many	Many/ several	Few	One
Freedom of entry	Unrestricted	Unrestricted	Restricted	Restricted or completely blocked
Nature of product	Undifferentiated	Differentiated	Undifferentiated or differentiated	Unique
Implications for demand curve	Horizontal: firm is a price taker	Downward sloping, but relatively elastic	Downward sloping. Relatively inelastic(shape depends on reactions of rivals)	Downward sloping; more inelastic than oligopoly. Firm has considerable control over price.
Average size of firms	Varies	Small	Small	Large
Possible consumer demand	Minimal	Mediocre	Large	Large
Profit making possibility	Minimal	Mediocre	Large	Large
Government intervention	High	Minimal	None	High
Example	Oranges, celery	Clothing stores	Heating and electrical appliances	Local water company

Game Theory

Game Theory is the idea that everyone lives their life like a game and every individual only makes decisions for their own personal gain.  It is best explained by a poker game.  Everyone is distrustful of those around them and they try and guess their opponents move before they take any action. 

The game theory actually started when the Soviet leaders tried to plan and control everything. The old politicians knew that interpreting and expressing the general will of the people was impossible so they followed their self intrest.  Game theory was also a way to mathematically analyze poker games.

I believe that the game theory still exists in a large amount of the population today.  People like Martha Stewart and Conrad Black didn't steal money for the good of the people, they did it for their own personal advantage.  People like this play their life like a game.

http://www.youtube.com/watch?v=54Dk3x4osik

Monopolistic Competition

Monopolistic Competitive Companies

Size:	Small Companies	Medium Companies	Large Companies
Features:	Coffee Shops	Nokia	Coca Cola
Differentiated products	Different beverages and snacks	Different cameras	Different flavours of pop
Control over price	Little control because of their competition with other coffee shops	A fair control over the price because of the demand and competition	Large control because there is a high demand for their products
Mass advertising	Newspapers and radio	Commercials, magazines, and billboards	Commercials, magazines, and billboards
Brand name goods	No	Yes	Yes

Monopolistic Competition is a market structure that has a large number of companies that sell similar products within a narrow price range.

There is very little differentiation within this market structure, although there is a bit of differentiation between companies so that they aren't an exact replica of one another.

Competing as Starbucks

I think that Starbucks would be part of a perfect competition market because they have good coffee, loyal customers, and they are everywhere in the world.  Starbucks realigned their business practices because aside from being fast and efficient they want to still provide the intimacy and romance between the customers and the baristas.  A large amount of their stores closed because they weren't making a large enough profit and the unnecessary amount of Starbuck locations minimized the intimacy for the customers and baristas.

By shutting down several stores, Starbucks reduced their costs as well as their profits.  I do think that Starbucks coffee is overpriced; however, they can get away with it.  There is a large demand for their product, Starbucks provides good quality coffee, they are fast and efficient, and they have stores almost everywhere.  If Starbucks were to decrease their prices they would sell more coffee.

This graph represents how the price of coffee effects the amount that is being sold.

http://www.google.ca/imgres?imgurl=http://www.mbs.edu/home/jgans/mecon/value/media%2520%2520files/static%2520graphics/jpegs/Segment%25203/3_2_static_market_demand.jpg&imgrefurl=http://www.mbs.edu/home/jgans/mecon/value/Segment%25203_2.htm&usg=__65wNKtDLDPPFPbKf0y_NNlTdHk8=&h=250&w=225&sz=29&hl=en&start=10&zoom=1&tbnid=PfPyvAZkwgUKLM:&tbnh=115&tbnw=101&ei=6KCkTZ_YE4nUgAexruWHCg&prev=/search%3Fq%3Ddecrease%2Bprices%2Band%2Bincrease%2Bquantity%2Bgraph%26um%3D1%26hl%3Den%26sa%3DN%26biw%3D1076%26bih%3D404%26tbm%3Disch0%2C458&um=1&itbs=1&iact=hc&vpx=742&vpy=52&dur=14430&hovh=200&hovw=180&tx=96&ty=126&oei=2qCkTeTmJ6-H0QHE6NjdCA&page=2&ndsp=12&ved=1t:429,r:10,s:10&biw=1076&bih=404

Other links used:

http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html

http://www.cbc.ca/news/business/story/2008/07/01/starbucks-closures.html

http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html

Long Run Costs and Economies of Sale

If I were to form a company I would create a chain of dance studios.  My company would offer dance lessons of every style for every age.  I would only have certified dance instructors teaching the classes and I would have an office person at every dance studio.  My first studio would be in Kelowna, BC and as my company expanded I would open up studios in Kamploops, Penticton, Nelson, Cranbrook, and possible Vancouver.  If my company was well off I would expand into Alberta.

My company would target people of all ages.  Not only would my dance studios offer dance lessons but they would also offer fitness classes.  The company would target people looking for a fun way to exercise, as well as dancers that wanted to perform and learn.

Some of the long run costs would include: power bills, heating, teachers wages, and office persons wages.  Repairs of the facilities, costume rentals, and stage rentals are all short term costs.  The fixed costs are rent or mortgage on the facilities.

The Studio Dance Co. is similar to the type of company that I would start.  It offers dance classes in various disciplines as well as fitness classes.  The only difference is that I would open up a chain of dance studios in different towns.  The Studio Dance Co. has trained proffessional teachers, a comfortable waiting area, safe facility, and it also offers summer workshops.  There wasn't much information on the financial aspect online, but by observing their website it seems that The Studio Dance Co. is financially stable.

http://www.studiodancers.com/

Law of Diminishing Returns

In the article "The Diminishing Returns to Tobacco Legislation" the author, Pierre Lemieux, makes some good points about how the frightful pictures on tobacco cases can scare off potential and current smokers.  His arguements weren't very clear throughout the article, lessening the debate.

I think that if the government kept the photos and warnings to cover only 25% of the case they would reach their "sweet spot".  The government would increase their profits if they kept the pictures to a minimum.  If they did that they would still make a profit, inform smokers of the risks, but they wouldn't scare the consumers away.

I think that the article would decrease the demand.  I only think that because it focuses on the negative effect of the warnings and pictures.

Website of article: http://www.pierrelemieux.org/artdiminish.html

Example of the warnings and pictures:

Elasticity and Revenue

My graph on the quantity, price, and total revenue of Joe Fresh Style yoga pants shows us that at the top of the demand curve, the demand for yoga pants is extremely elastic and on the bottom half the total revenue rises.  As the price drops, both the elasticity and total revenue fall.  The largest amount of total revenue($150) is reached when the quantity is 5 yoga pants and the price is $30 per pant.

http://www.theglobeandmail.com/report-on-business/rob-magazine/grocery-aisle-glamour/article730387/page1/

Oil and Gas Industry in Alberta

The oil and gas industry in Alberta is doing extremely well right now.  Canada has the worlds 2nd largest crude oil reserves and most of them are in Alberta, Alberta supplies the US with 15% of their oil, and the oil sands account for more than two-thirds of investment in Alberta.  Oil sand investments increased by 14% from 2007 to 2008.  For 6 years in a row, Alberta/ Canada has been the largest gas supplier to the US.  Canada is the 2nd largest exporter and is the 3rd larger producer of natural gas.

I think that the oil and gas industry in Alberta is going to keep rising for several years.  There still is a large demand for this industry and Alberta has all of the resources.  I believe that the elasticity for the oil and gas industry in Alberta is quite high.  We have supplied our country and others with this industry for several years now and I am sure that there is lots more to come.

http://alberta.ca/home/181.cfm


Alberta Annual Oil and Gas Industry Investment, 1999 - 2008

https://osi.alberta.ca/osi-content/Pages/Factsheets/AlbertaAnnualOilandGasIndustryInvestment.aspx

Changes in Demand

There are several reasons why demand changes throughout our economy.  Different prices, preferences, and income all have an effect on demand for specific products.

It is a known fact that if something is on sale or is being sold at a low price there is going to be more of a demand for that product.  Whenever I see that one of my favorite products is on sale I immediately rush out to buy it.  Earlier today I had heard that gas prices were supposed to go up by a large amount so I made sure to go out and fuel up my car.  While I was at the gas station all of the pumps were being used.  The demand for gas is high right now because people are being told that prices are going up.

Even if prices are low on a specific product, a person won't buy it if they do not like what it is that is being sold.  A person with a low income will spend their money very carefully and wisely and they won't create much of a demand for unnecessary products.

A very effective way to demonstrate the changes in demand is by using a graph.  Graphs can show exactly how price and demand are linked together.

This graph proves that when price is high the demand is low and when price is low the demand is high.