Ever wondered whether all those shops selling the same product actually manage to survive? How long do they remain in the competition? What keeps them in the race towards profits and survival? When do businesses close down and why?
Think bubble tea. They used to be such a craze and even though many many shops were selling the same menus of bubble tea, they still had long queues! But after a while, the bubble tea trend exhausted itself and it died down, leaving a few competitors in the market working with low sales volume. Was the competition perfect in a sense where everybody could start a bubble tea business with as little capital as possible and sold the same thing as everybody else?
Then came KOI. Its start up has been more than successful! The wait for that delicious bubble tea can last up to 30mins depending on the time of the day. Many others have attempted to achieve KOI’s success but came short. What is the source of KOI’s MONOPOLISTIC power? Is it the branding? Its ability to achieve low costs?
This is why we study market structures – To understand the behavior of specific firms and their adverse environments. I have truly enjoyed the study of market structures because it has opened my eyes to how business start, operate, succeed and sadly, fail. I hope you will gain a great deal of knowledge about the business world from studying market structures.
At the end of this video, you should be able to:
Additional Learning Material:
Note: The term supernormal profit may not be used by your lecturer. If your lecturer uses a different term, then go ahead and use that for your discussions and revision so that you are not confused over the terms.