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

Kinked Demand Curves - 38
Many oligopolies face kinked demand curves. The demand curve for the product has two sections; one an elastic section, and the other an inelastic section.

Consumers like tomatoes, but as price falls, they will not buy ever greater amounts of them. Consumers will switch their buying patterns from one store to another, however. The two stores are close substitutes, and changes in price between stores will result in marked reductions in sales volume, from one store to the other. However, from the perspective of the total market demand for tomatoes (the total amount of tomatoes bought from all stores), demand for tomatoes is inelastic when the price of tomatoes is already low.

Woolworths knows that if it decreases its price, it will make greater sales, but only if Coles does not decrease its price in response. If Coles does decrease its price, and Woolworths decreases its price even further (to $3 per kg), neither firm will make greater profits overall. Consumers will benefit; they will enjoy cheap tomatoes, while the retailers are making very low levels of profit.

Price wars do not benefit firms; they benefit consumers.

The major retailers concentrate their competitive efforts in non price areas; such as advertising, and after-sales service, as a result. Critics of firms operating in oligopolistic markets say that these firms are not interested in real competition, that results in lower prices for consumers. Rather, they are interested in operating in ways that maintain a ''cosy'' sharing of the market, and high levels of profits for the firms in these markets. Prices in oligopolistic markets tend to stay steady, most of the time, for this reason.