PRODUCT MARKETS - KCSE BUSINESS STUDIES NOTES, AUDIOVISUALS, QUESTION AND ANSWER

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PRODUCT MARKETS - KCSE BUSINESS STUDIES NOTES, AUDIOVISUALS, QUESTION AND ANSWER

SPECIFIC OBJECTIVES

By the end of this topic the learner should be able to:

1. explain the meaning of a market
2. explain the meaning of product market
3. discuss the features of various types of product markets.

cONTENTS

1. Meaning of a market
2. Meaning of product market
3. Features of various types of product markets

PRODUCT MARKET

The term ‘market’ is usually used to mean the place where buyers and sellers meet to transact business. In Business studies, however, the term ‘market’ is used to refer to the interaction of buyers and sellers where there is an exchange of goods and services for a consideration.
NOTE: The contact between sellers and buyers may be physical or otherwise hence a market is not necessarily a place, but any situation in which buying and selling takes place. A market exists whenever opportunities for exchange of goods and services are available, made known and used regularly.

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Definition of Product market

​It is a particular market in which specific goods and services are sold and with particular features that distinguish it from the other markets. The features are mainly in terms of the number of sellers and buyers and whether the goods sold are homogeneous or heterogeneous. Product market is also referred to as market structure. Markets may be classified according to the number of firms in the industry or the type of products sold in them.

TYPES OF PRODUCT MARKET

The number of firms operating in a particular market will determine the degree of competition that will exist in a given industry. In some markets there are many sellers meaning that the degree of competition is very high, where as in other markets there is no competition because only one firm exists.
When markets are classified according to the degree of competition, there are four main types, these are;

1. Perfect competition
2. Pure monopoly (monopoly)
3. Monopolistic competition
4. Oligopoly

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QUESTIONS ON ​PRODUCT MARKETS

1. Explain five characteristic of a monopolistic market.
2. By use of a diagram, explain how price and output are determined in a collusive oligopoly (centralized cartel) market situation
3. Highlight five differences between perfect competition and monopolistic competition
4. Using a well labeled diagram, explain how a monopolist enjoy a supernormal profit in both short and long run​
5. 
   
   1. With the aid of a diagram, explain how a firm under monopolistic competition is at equilibrium in the short run
   2. With the aid of a diagram, explain the difference between perfect competition and monopoly revenue curves

ANSWERS

QUESTION 1

1. To check on the quality of goods produced by monopoly.
2. Ensure there are a variety of goods in the market.
3. Monopolist may resist emergence of new ideas or technology due to lack of competition.
4. Monopolies tend to be inefficient in their operation due to lack of competition.
5. The consumers may not enjoy quality goods and services because they can only consume what his monopolis produces.
6. To control the prices charges by the monopolies
7. Make sure monopolies operate at optimum capacity so as not to charge high prices.

QUESTION 2

Price Determination under Oligopoly: Non-Collusive and Collusive

QUESTION 3

PERFECT COMPETITION 

1. Sellers deal in homogeneous products
2. Are not involved in promotion of products.
3. It’s a price taker
4. Large number of sellers
5. Activities of one firm does not influence the activities of other firms

MONOPOLISTIC COMPETITION

1. Sellers deal in differentiated products
2. incur heavy expenses in promotion of products
3. it’s a price setter /giver
4. Large number of sellers operating independently.
5. Activities of one firm are closely monitored by the rest in the industry.

QUESTION 4

1. When the product is a necessity
2. When the product is the only one in the market
3. When the consumers are not aware of the market changes
4. When the price of the product makes an insignificant figure of the consumers income

QUESTION 5.1

QUESTION 5.2

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