Ángel and Leire
Learning situation 3
The distribution of income
Factors that Condition Markets
The Market
Types of Markets
The Demand
01
THE MARKET
Why do shrimp prices go up at christmas? Why are hotels more expensive in summer than in Winter? Why did face mask go up in price at the beginning of the COVID-19 outbreak?
Most people respond to these questions with ''its supply and demand'' ,although they don't quite know what they mean. In this topic, we are going to learn just that.How supply and demand work which will allow you to understand why prices go up or down?
01
THE MARKET
The market is a fiscal or virtual place where buyers and sellers exchange goods or services for a payment. We can talk about the Housing market, coffee, vegetables, gasoline etc. because in all of them that particular good is exchanged in exchange for a payment.
THE MARKET
HOW DO MARKETS WORK
The buyers: They form the market demand and decide how much of a good they want to buy based on it price The sellers: They form the supply side of the marker and decide how much of a good or service they wish to offer in the market Prices: They arrise as a bargaining process between sellers and buyers.Buyers wish to buy more cheaply and sellers wish to sell more expensive. When supply and demand balance a market price is established.
01
01
HOW DO MARKETS WORK
We live in a market economy where no one tells us what to buy. Likewise, no one tells companies what to produce. But if we all make these decisions individually, how can we be sure that the markets will have the products we want and that the quantity will be sufficient?Imagine that suddenly, for some reason, everyone suddenly wants to buy more bread. How can companies know that they now have to produce a larger quantity, the key to how the market works in these prices. This is for three reasons.
Sellers and consumers want to reach an agreement on price.
Sellers want to sell their product at the highest possible price, thus making more money, and buyers want to pay the lowest possible price. Therefore, a price will be set that may be suitable for both if the buyer considers that the price is too high he will not buy it and if the price is too low, the seller will not find it interesting to produce the goods and consumers will not be able to satisfy their needs. Therefore, a price will be set that can be suitable for both.
01
Prices are signals of the market
If suddenly more people want to buy more bread at the fixed price, it will run out very quickly in the bakeries. Therefore, the next day, consumers will not want to run out of bread and will be willing to pay more money for what they want. Companies are not stupid, and they know that when something runs out very quickly, prices can be raised. This price increase triggers a signal in the market. The opposite will happen. If fewer people want to buy bread for some reason, bread will go unsold.And these stores' only option is to lower their prices to try to get sales.Again, the price decrease is a signal from the market. There is too much of that product and having to sell it cheaper will result in less profit.
01
Prices are signals of the market
If suddenly more people want to buy more bread at the fixed price, it will run out very quickly in the bakeries. Therefore, the next day, consumers will not want to run out of bread and will be willing to pay more money for what they want. Companies are not stupid, and they know that when something runs out very quickly, prices can be raised. This price increase triggers a signal in the market. The opposite will happen. If fewer people want to buy bread for some reason, bread will go unsold.And these stores' only option is to lower their prices to try to get sales.Again, the price decrease is a signal from the market. There is too much of that product and having to sell it cheaper will result in less profit.
01
Prices are incentives for businesses
Price increases are very profitable for bakeries, which can now sell more expensive bread and make more money. And companies go to profits as flies go to honey. It won't be long before new bakeries start.Opening Since selling bread now makes a lot of profit, we can now answer the question. Companies know that they must produce more of those goods where prices are rising because scarcity has been generated that makes buyers pay more for this product.
01
WHY IS THE FREE OPERATION OF THE MARKET IMPORTANT
The free market has benefits for the economy by encouraging competition and innovation. As sellers are motivated to offer quality products at the most competitive price possible to sell more, the market gives us an incentive to i mprove.
Prices act as signals, informing producers which goods people want because they are willing to pay more for them. If prices did not move freely, we would not know what goods to produce.
02
THE DEMAND
The demand for a good is the quantity of that good that demanders are willing to purchase at a given price. It should be clear that demand is the intention to buy at a given price.
02
THE DEMAND
The table and demand curve
Notice that the table shows that if the price of coffee is €1.00, the quantity of people demand is 4 million caps, but if the price rises to 1.50, people will want to buy less.Some will now drink tea or simply less coffee, and the quantity demanded will be 2.1 million caps. In the same way, if the price goes down to 0.50 being cheaper, they will want to buy more, up to 8.2 million.
02
THE SUPPLY
The supply of goods expresses the behavior of sellers. It is the quantity of a good that companies wish to sell in the market at a given price. It should be clear that supply is the intention to sell at a given price.
If prices are low, there will be very few producers willing to sell because they will barely make any money. If prices rise producers will want to sell more as it allows them to make more profit.
02
THE SUPPLY
The table and supply curve
Notice that the table shows us that if the price of coffee is €1.00, the quantity that farmers offer is 4 million cups. But if the price goes up to €150, the farmers will now want to sell more coffee. They will earn more money and the quantity demanded will be 5.5 million cups.In the same way, if the price goes down to 0.50 euros, the farmers will want to produce less coffee because now they will earn less money and will offer only 1million caps.
IMPORTANT
This is a very common mistake made by students of economics. Your thought is usually ‘’since prices are high, few people will buy it and therefore few people will offer for it’’. The mistake is not realizing that if prices are rising, it is precisely the opposite because people are buying it.
02
MARKET EQUILIBRIUM
It is clear that consumers will want to buy a product at the lowest possible price and producers will want to sell it at the highest possible price.There is, however, a point of equilibrium where both parties agree to exchange a given quantity of goods at a given price that suits everyone.
At the equilibrium point, the desires of the bidders coincide with the demander’s. The quantity that some are willing to produce (quantity supplied) at a given price coincides with the quantity that others are willing to consume(Quantity demanded)
03
FACTORS THAT CONDITION MARKETS
Number of companies in the market
There are some markets that have many sellers, such as bakeries. In these markets, it is more difficult for companies to raise prices since consumers have many alternatives to be able to buy the product cheaper.But there are other markets with few companies, such as cell phone companies or gas stations. As a general rule, in those markets where there are few companies, they will be able to raise prices. The reason is obvious as we hardly have any alternatives. Companies take advantage and raise prices.
When the goods produced by firms are identical, we say that they are homogeneous. For example, it is difficult to differentiate between the tomatoes of 1 green grocer and those of another. On the contrary, when it is possible to differentiate the products of a company with.That the goods are differentiated. For example, we can easily differentiate a Mercedes, a BMW and a Renault or a Seat. When we perceive our product as very different from others, we are willing to pay a higher amount of money. So companies take advantage of this to raise prices. This is what happens with the iPhone or Coca-Cola. As people see them as different from others, these companies can raise their prices.
03
Differentiation of the goods produced
FACTORS THAT CONDITION MARKETS
FACTORS THAT CONDITION MARKETS
Existence of market entry barriers
03
In some markets, companies can freely enter the market to produce.Anyone can, for example, set up a bakery or a clothing store in other markets. It is very difficult for new companies to enter the market because new competitors do not have the necessary technology. For example, it is difficult to compete with highly developed computers such as HP or Lenovo.In other legal licenses are needed to enter to compete. For example, in Spain, a license is needed to own a cab.In markets where there are barriers that prevent companies from entering to compete, the alternatives are reduced for consumers and companies take advantage of this to raise prices.
FACTORS THAT CONDITION MARKETS
Existence of market entry barriers
03
In some markets, companies can freely enter the market to produce.Anyone can, for example, set up a bakery or a clothing store in other markets. It is very difficult for new companies to enter the market because new competitors do not have the necessary technology. For example, it is difficult to compete with highly developed computers such as HP or Lenovo.In other legal licenses are needed to enter to compete. For example, in Spain, a license is needed to own a cab.In markets where there are barriers that prevent companies from entering to compete, the alternatives are reduced for consumers and companies take advantage of this to raise prices.
FACTORS THAT CONDITION MARKETS
03
Existence of perfect information
We say that in a market there is perfect information when we know exactly all the market conditions. In other words, we know all the products and prices in the market at all times. In other markets there is no perfect information. So the existence of other alternatives or the way in which prices are formed is unknown. This happens in the electricity market, a market in which it is very complicated to understand the electricity bill, something that companies take advantage of to raise prices.
GAME
Match the different definitions
Number of companies in the market
Not much people offering goods
Differentiation of goods produced
It is difficult to enter the market
You do not know how the market works
Existence of market entry barriers
Products are not equal
Existence of perfect information
GAME
Match the different definitions
Number of companies in the market
Not much people offering goods
Differentiation of goods produced
It is difficult to enter the market
You do not know how the market works
Existence of market entry barriers
Products are not equal
Existence of perfect information
04
TYPES OF MARKETS
LEVEL OF COMPETITION
GEOGRAPHICAL AREA
PURCHASE REASON
04
TYPES OF MARKETS
LEVEL OF COMPETITION
Competitive or perfect competition markets
Competitive or perfect competition markets are those where companies do not have the capacity to influence prices so that they will have to set a price similar to the competition. The example of bakeries in a city is a good example of a competitive market if a bakery were to try to charge twice.The price of its competitors for bread, it will certainly lose almost all its consumers. This is because consumers can find other equally good alternatives at a lower price. Therefore, competitive markets have the following characteristics.
04
TYPES OF MARKETS
LEVEL OF COMPETITION
There are many sellers. This ensures that if a company were to raise the price, consumers would have many other options to choose from.
Products are homogeneous, very similar. If a company raised the price, consumers will not want to pay more because they can buy the same thing from another seller.
There is freedom of entry for new companies. Thus if a shortage of a product arises, then competitors will enter the markets, thus ensuring more alternatives.
There is perfect information. If someone raises the price, consumers will be aware that there are other cheap options.
04
TYPES OF MARKETS
LEVEL OF COMPETITION
Non competitive or imperfectly competitive markets
Are those in which companies have some ability to influence the price. For example, if a cola raises its price, it will lose some customers, but many will continue to buy it. The same is true if Apple raises the price of the iPhone or Sony raises the price of the PlayStation. In recent years, all these products have gone up in price, and yet many customers have continued to buy.Obviously in noncompetitive markets some of the above characteristics are not met. If there were, it would be a competitive market, but there may be a combination of them. Some of the above characteristics may be met and others not, depending on double characteristics, number of sellers, differentiation of goods, existence of entry barriers and existence of information.We distinguish three types of noncompetitive markets, monopoly, oligopoly and monopolistic competition.
MONOPOLY
01
Is the extreme case in which there is a single seller for the entire market. This is due to entry barriers that prevent other competitors:*Control of a productive factor to which no one else has access. *Natural monopoly, which makes it more profitable for there to be only one company. *Technological superiority, which makes it impossible for other companies to compete.For example, in Spain until 2021 there was only one train company (RENFE), and it is still the only option for most journeys. That is, in most cases, if you want to travel by train, there is only one company.The result of the monopoly is that, as there are no competitors, the company can raise the price, as consumers have no other option.
02
OLIGOPOLY
it happens when a few companies dominate the majority of the market. For example, there are few options for choosing a video game console or a cola soft drink. The effect is usually the same as monopoly. Companies take advantage of the customers' lack of alternatives and raise the price (as with PlayStation).
Usually, the reasons why there are few sellers (such as oligopoly) is that there are barriers to entry. Some of these barriers may be:
The need to make a large investment to start the business, something that not many companies can afford (you have to invest a lot of money to develop a quality video game console).
Legal restrictions that prevent new companies from entering the market. For example, a license is needed to set up a pharmacy or gas station in Spain. Cost advantages. If a company produces cheaper than others, it will be difficult for other companies to compete
MONOPOLISTIC COMPETITION
Monopolistic competition: occurs when we have many sellers offering a differentiated product. For example, in the perfume or fast food market we have many choices, but we can clearly differentiate the products of one company from those of another. In these markets, companies work hard to ensure that consumers perceive their products as different and better than others.Companies that manage to have a product that customers see as more different will be able to influence the price (and set it higher); if they do not, they will have to settle for a lower price similar to that of the competition
TYPES OF MARKET
ACCORDING TO GEOGRAPHICAL AREA
ACCORDING TO THE PURCHASE REASON
ACCORDING TO GEOGRAPHICAL AREA
- We can differentiate between local markets (in a municipality), regional markets (within an area with more municipalities), national markets (a whole country) or international markets (several countries).
ACCORDING TO THE PURCHASE REASON
VS
- Consumer. These are markets where consumers go to buy products for their own consumption. For example, a supermarket.
- Brutal intonio
- Industrial market. These are markets where companies go to buy the raw materials or machines needed to produce. For example, the wood market where a company that manufactures furniture may go.
00:00
01
MARKETS
Today wealth is very unequally distributed. Many young people earn about 800 euros a month for working long hours, while the top managers are earning thousands and thousands of euros. I don't want to discourage you, but in Spain, only 20 people have the same money as 13 million Spaniards together (30% of the population). And among the 4 million people who earn more money, they have the same as the other 40 million people together.
THE MARKET EXCLUDES CERTAIN PEOPLE
Those who cannot find work in general, or related to their qualifications.
Those whose work receives no income.
Those who are unable to work, such as children or the elderly.
The market does not ensure an income for these three groups of people.
INEQUALITY OF OPPORTUNITIES
DISTRIBUTION
>
Inequality. In both the United States and Europe, inequality is growing. In fact, in the United States, the richest 1% control 40% of the country's wealth, while millions of people live in poverty. There, 90% of the poorest people have only 23% of the total wealth. In Spain the situation is not good either, where the richest 1% control 25.1% of the wealth and the richest 10% have 53.8%.
>
Poverty. Due to the unequal distribution of income, we have a problem of poverty in developed countries. We must clarify that by poverty we are not only referring to people who live on the street or who have problems covering the basic needs that ensure survival. There is another important concept: relative poverty.
The growing gap between rich and poor Americans is one of the U.S.’s biggest challenges, with the top 1% controlling more wealth now than at any time in the last 50 years. A recent survey found that over half the country thinks it’s a problem, though most people might not know exactly what wealth inequality looks like. Tony Dokoupil speaks to Americans to see if they know what their “share of the pie” looks like.
Learning situation 3
Leire Machón Castillo
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Transcript
Ángel and Leire
Learning situation 3
The distribution of income
Factors that Condition Markets
The Market
Types of Markets
The Demand
01
THE MARKET
Why do shrimp prices go up at christmas? Why are hotels more expensive in summer than in Winter? Why did face mask go up in price at the beginning of the COVID-19 outbreak? Most people respond to these questions with ''its supply and demand'' ,although they don't quite know what they mean. In this topic, we are going to learn just that.How supply and demand work which will allow you to understand why prices go up or down?
01
THE MARKET
The market is a fiscal or virtual place where buyers and sellers exchange goods or services for a payment. We can talk about the Housing market, coffee, vegetables, gasoline etc. because in all of them that particular good is exchanged in exchange for a payment.
THE MARKET
HOW DO MARKETS WORK
The buyers: They form the market demand and decide how much of a good they want to buy based on it price The sellers: They form the supply side of the marker and decide how much of a good or service they wish to offer in the market Prices: They arrise as a bargaining process between sellers and buyers.Buyers wish to buy more cheaply and sellers wish to sell more expensive. When supply and demand balance a market price is established.
01
01
HOW DO MARKETS WORK
We live in a market economy where no one tells us what to buy. Likewise, no one tells companies what to produce. But if we all make these decisions individually, how can we be sure that the markets will have the products we want and that the quantity will be sufficient?Imagine that suddenly, for some reason, everyone suddenly wants to buy more bread. How can companies know that they now have to produce a larger quantity, the key to how the market works in these prices. This is for three reasons.
Sellers and consumers want to reach an agreement on price.
Sellers want to sell their product at the highest possible price, thus making more money, and buyers want to pay the lowest possible price. Therefore, a price will be set that may be suitable for both if the buyer considers that the price is too high he will not buy it and if the price is too low, the seller will not find it interesting to produce the goods and consumers will not be able to satisfy their needs. Therefore, a price will be set that can be suitable for both.
01
Prices are signals of the market
If suddenly more people want to buy more bread at the fixed price, it will run out very quickly in the bakeries. Therefore, the next day, consumers will not want to run out of bread and will be willing to pay more money for what they want. Companies are not stupid, and they know that when something runs out very quickly, prices can be raised. This price increase triggers a signal in the market. The opposite will happen. If fewer people want to buy bread for some reason, bread will go unsold.And these stores' only option is to lower their prices to try to get sales.Again, the price decrease is a signal from the market. There is too much of that product and having to sell it cheaper will result in less profit.
01
Prices are signals of the market
If suddenly more people want to buy more bread at the fixed price, it will run out very quickly in the bakeries. Therefore, the next day, consumers will not want to run out of bread and will be willing to pay more money for what they want. Companies are not stupid, and they know that when something runs out very quickly, prices can be raised. This price increase triggers a signal in the market. The opposite will happen. If fewer people want to buy bread for some reason, bread will go unsold.And these stores' only option is to lower their prices to try to get sales.Again, the price decrease is a signal from the market. There is too much of that product and having to sell it cheaper will result in less profit.
01
Prices are incentives for businesses
Price increases are very profitable for bakeries, which can now sell more expensive bread and make more money. And companies go to profits as flies go to honey. It won't be long before new bakeries start.Opening Since selling bread now makes a lot of profit, we can now answer the question. Companies know that they must produce more of those goods where prices are rising because scarcity has been generated that makes buyers pay more for this product.
01
WHY IS THE FREE OPERATION OF THE MARKET IMPORTANT
The free market has benefits for the economy by encouraging competition and innovation. As sellers are motivated to offer quality products at the most competitive price possible to sell more, the market gives us an incentive to i mprove.
Prices act as signals, informing producers which goods people want because they are willing to pay more for them. If prices did not move freely, we would not know what goods to produce.
02
THE DEMAND
The demand for a good is the quantity of that good that demanders are willing to purchase at a given price. It should be clear that demand is the intention to buy at a given price.
02
THE DEMAND
The table and demand curve
Notice that the table shows that if the price of coffee is €1.00, the quantity of people demand is 4 million caps, but if the price rises to 1.50, people will want to buy less.Some will now drink tea or simply less coffee, and the quantity demanded will be 2.1 million caps. In the same way, if the price goes down to 0.50 being cheaper, they will want to buy more, up to 8.2 million.
02
THE SUPPLY
The supply of goods expresses the behavior of sellers. It is the quantity of a good that companies wish to sell in the market at a given price. It should be clear that supply is the intention to sell at a given price.
If prices are low, there will be very few producers willing to sell because they will barely make any money. If prices rise producers will want to sell more as it allows them to make more profit.
02
THE SUPPLY
The table and supply curve
Notice that the table shows us that if the price of coffee is €1.00, the quantity that farmers offer is 4 million cups. But if the price goes up to €150, the farmers will now want to sell more coffee. They will earn more money and the quantity demanded will be 5.5 million cups.In the same way, if the price goes down to 0.50 euros, the farmers will want to produce less coffee because now they will earn less money and will offer only 1million caps.
IMPORTANT
This is a very common mistake made by students of economics. Your thought is usually ‘’since prices are high, few people will buy it and therefore few people will offer for it’’. The mistake is not realizing that if prices are rising, it is precisely the opposite because people are buying it.
02
MARKET EQUILIBRIUM
It is clear that consumers will want to buy a product at the lowest possible price and producers will want to sell it at the highest possible price.There is, however, a point of equilibrium where both parties agree to exchange a given quantity of goods at a given price that suits everyone.
At the equilibrium point, the desires of the bidders coincide with the demander’s. The quantity that some are willing to produce (quantity supplied) at a given price coincides with the quantity that others are willing to consume(Quantity demanded)
03
FACTORS THAT CONDITION MARKETS
Number of companies in the market
There are some markets that have many sellers, such as bakeries. In these markets, it is more difficult for companies to raise prices since consumers have many alternatives to be able to buy the product cheaper.But there are other markets with few companies, such as cell phone companies or gas stations. As a general rule, in those markets where there are few companies, they will be able to raise prices. The reason is obvious as we hardly have any alternatives. Companies take advantage and raise prices.
When the goods produced by firms are identical, we say that they are homogeneous. For example, it is difficult to differentiate between the tomatoes of 1 green grocer and those of another. On the contrary, when it is possible to differentiate the products of a company with.That the goods are differentiated. For example, we can easily differentiate a Mercedes, a BMW and a Renault or a Seat. When we perceive our product as very different from others, we are willing to pay a higher amount of money. So companies take advantage of this to raise prices. This is what happens with the iPhone or Coca-Cola. As people see them as different from others, these companies can raise their prices.
03
Differentiation of the goods produced
FACTORS THAT CONDITION MARKETS
FACTORS THAT CONDITION MARKETS
Existence of market entry barriers
03
In some markets, companies can freely enter the market to produce.Anyone can, for example, set up a bakery or a clothing store in other markets. It is very difficult for new companies to enter the market because new competitors do not have the necessary technology. For example, it is difficult to compete with highly developed computers such as HP or Lenovo.In other legal licenses are needed to enter to compete. For example, in Spain, a license is needed to own a cab.In markets where there are barriers that prevent companies from entering to compete, the alternatives are reduced for consumers and companies take advantage of this to raise prices.
FACTORS THAT CONDITION MARKETS
Existence of market entry barriers
03
In some markets, companies can freely enter the market to produce.Anyone can, for example, set up a bakery or a clothing store in other markets. It is very difficult for new companies to enter the market because new competitors do not have the necessary technology. For example, it is difficult to compete with highly developed computers such as HP or Lenovo.In other legal licenses are needed to enter to compete. For example, in Spain, a license is needed to own a cab.In markets where there are barriers that prevent companies from entering to compete, the alternatives are reduced for consumers and companies take advantage of this to raise prices.
FACTORS THAT CONDITION MARKETS
03
Existence of perfect information
We say that in a market there is perfect information when we know exactly all the market conditions. In other words, we know all the products and prices in the market at all times. In other markets there is no perfect information. So the existence of other alternatives or the way in which prices are formed is unknown. This happens in the electricity market, a market in which it is very complicated to understand the electricity bill, something that companies take advantage of to raise prices.
GAME
Match the different definitions
Number of companies in the market
Not much people offering goods
Differentiation of goods produced
It is difficult to enter the market
You do not know how the market works
Existence of market entry barriers
Products are not equal
Existence of perfect information
GAME
Match the different definitions
Number of companies in the market
Not much people offering goods
Differentiation of goods produced
It is difficult to enter the market
You do not know how the market works
Existence of market entry barriers
Products are not equal
Existence of perfect information
04
TYPES OF MARKETS
LEVEL OF COMPETITION
GEOGRAPHICAL AREA
PURCHASE REASON
04
TYPES OF MARKETS
LEVEL OF COMPETITION
Competitive or perfect competition markets
Competitive or perfect competition markets are those where companies do not have the capacity to influence prices so that they will have to set a price similar to the competition. The example of bakeries in a city is a good example of a competitive market if a bakery were to try to charge twice.The price of its competitors for bread, it will certainly lose almost all its consumers. This is because consumers can find other equally good alternatives at a lower price. Therefore, competitive markets have the following characteristics.
04
TYPES OF MARKETS
LEVEL OF COMPETITION
There are many sellers. This ensures that if a company were to raise the price, consumers would have many other options to choose from. Products are homogeneous, very similar. If a company raised the price, consumers will not want to pay more because they can buy the same thing from another seller. There is freedom of entry for new companies. Thus if a shortage of a product arises, then competitors will enter the markets, thus ensuring more alternatives. There is perfect information. If someone raises the price, consumers will be aware that there are other cheap options.
04
TYPES OF MARKETS
LEVEL OF COMPETITION
Non competitive or imperfectly competitive markets
Are those in which companies have some ability to influence the price. For example, if a cola raises its price, it will lose some customers, but many will continue to buy it. The same is true if Apple raises the price of the iPhone or Sony raises the price of the PlayStation. In recent years, all these products have gone up in price, and yet many customers have continued to buy.Obviously in noncompetitive markets some of the above characteristics are not met. If there were, it would be a competitive market, but there may be a combination of them. Some of the above characteristics may be met and others not, depending on double characteristics, number of sellers, differentiation of goods, existence of entry barriers and existence of information.We distinguish three types of noncompetitive markets, monopoly, oligopoly and monopolistic competition.
MONOPOLY
01
Is the extreme case in which there is a single seller for the entire market. This is due to entry barriers that prevent other competitors:*Control of a productive factor to which no one else has access. *Natural monopoly, which makes it more profitable for there to be only one company. *Technological superiority, which makes it impossible for other companies to compete.For example, in Spain until 2021 there was only one train company (RENFE), and it is still the only option for most journeys. That is, in most cases, if you want to travel by train, there is only one company.The result of the monopoly is that, as there are no competitors, the company can raise the price, as consumers have no other option.
02
OLIGOPOLY
it happens when a few companies dominate the majority of the market. For example, there are few options for choosing a video game console or a cola soft drink. The effect is usually the same as monopoly. Companies take advantage of the customers' lack of alternatives and raise the price (as with PlayStation). Usually, the reasons why there are few sellers (such as oligopoly) is that there are barriers to entry. Some of these barriers may be: The need to make a large investment to start the business, something that not many companies can afford (you have to invest a lot of money to develop a quality video game console). Legal restrictions that prevent new companies from entering the market. For example, a license is needed to set up a pharmacy or gas station in Spain. Cost advantages. If a company produces cheaper than others, it will be difficult for other companies to compete
MONOPOLISTIC COMPETITION
Monopolistic competition: occurs when we have many sellers offering a differentiated product. For example, in the perfume or fast food market we have many choices, but we can clearly differentiate the products of one company from those of another. In these markets, companies work hard to ensure that consumers perceive their products as different and better than others.Companies that manage to have a product that customers see as more different will be able to influence the price (and set it higher); if they do not, they will have to settle for a lower price similar to that of the competition
TYPES OF MARKET
ACCORDING TO GEOGRAPHICAL AREA
ACCORDING TO THE PURCHASE REASON
ACCORDING TO GEOGRAPHICAL AREA
ACCORDING TO THE PURCHASE REASON
VS
00:00
01
MARKETS
Today wealth is very unequally distributed. Many young people earn about 800 euros a month for working long hours, while the top managers are earning thousands and thousands of euros. I don't want to discourage you, but in Spain, only 20 people have the same money as 13 million Spaniards together (30% of the population). And among the 4 million people who earn more money, they have the same as the other 40 million people together.
THE MARKET EXCLUDES CERTAIN PEOPLE
Those who cannot find work in general, or related to their qualifications.
Those whose work receives no income.
Those who are unable to work, such as children or the elderly.
The market does not ensure an income for these three groups of people.
INEQUALITY OF OPPORTUNITIES
DISTRIBUTION
> Inequality. In both the United States and Europe, inequality is growing. In fact, in the United States, the richest 1% control 40% of the country's wealth, while millions of people live in poverty. There, 90% of the poorest people have only 23% of the total wealth. In Spain the situation is not good either, where the richest 1% control 25.1% of the wealth and the richest 10% have 53.8%. > Poverty. Due to the unequal distribution of income, we have a problem of poverty in developed countries. We must clarify that by poverty we are not only referring to people who live on the street or who have problems covering the basic needs that ensure survival. There is another important concept: relative poverty.
The growing gap between rich and poor Americans is one of the U.S.’s biggest challenges, with the top 1% controlling more wealth now than at any time in the last 50 years. A recent survey found that over half the country thinks it’s a problem, though most people might not know exactly what wealth inequality looks like. Tony Dokoupil speaks to Americans to see if they know what their “share of the pie” looks like.