Index
Introduction - 1
Defining A Market - 2
The Importance Of Competition - 3
The Result Of Competition - 4
Intervening In Markets - 5
The Allocative Role - 6
The Distributive Role - 7
The Regulative Role - 8
The Regulative Role (continued) - 9
The Role Of Government - 10
The Role of Government (continued) - 11
The Stabilizing Role - 12
Vertical and Horizontal Integration Defined - 13
Defining Market Structure - 14
How A Firm Can Grow - 15
Mergers and Takeovers - 16
Vertical And Horizonal Integration (Diagram) - 17
Why markets Vary in Structure - 18
Product Differentiation - 19
Product Differentiation (continued) - 20
Free Range ''Googs''- 21
Product Differentiation (continued) - 22
Non Price Competition - 23
Non Price Competition (continued) - 24
Defining The Types Of Market Structures - 25
Perfect Competition - 26
Perfect Competition (continued) - 27
The Market For Oranges - 28
The Market For Oranges (continued) - 29
Bitter Oranges - 30
Summary: Perfect Competition - 31
Monopolistic Competition - 32
True Blue Oranges - 33
Monopolistic Competition (continued) - 34
Oligopoly - 35
Oligopoly (continued) - 36
Oligopoly (continued) - 37
Kinked Demand Curves - 38
OPEC - 39
OPEC (continued) - 40
Monopoly - 41
Microsoft - 42
Why Monopolies Are Inefficient - 43
Revision Questions On Market Forms - 44

Monopolistic Competition - 34
Hairdressers and barbers operate in a monopolistically competitive market.

In the diagram to the left, we see the effect of one salon increasing the price for a standard cut from $12 to $15 (a 25% increase).

Sales have fallen from 150 haircuts per week to 100 per week (a 33% decrease).

What can this hairdresser do to increase sales back to the old level?

Many service providers advertise that their ''customer service'' is better than their competitors. Techniques used are to promote the idea that the salon is a ''friendly'' place; that customers names and preferences are remembered, and that staff are courteous. Some salons run ''customer loyalty'' programs; a record is kept of each hair cut, and after a certain number of visits, a free service is given. There are many such marketing schemes.

Monopolistically competitive markets can be found in a wide range of industries. One major area is in clothing retailing, and other small businesses. Many service markets are monopolistically competitive; consider electricians, plumbers, hairdressers, lawn mowing; add to the list yourself.