Lesson 6: Understanding Market Structures for an Entrepreneur

In this lesson students will be introduced to the four market structures and how the characteristics of each affect business decisions of an entrepreneur. 

Economics

Entrepreneurs must make many decisions related to their businesses. Many of these decisions—such as pricing, marketing, and strategy—are influenced by the market structure they operate within. Therefore, it is important for students to understand the four different market structures—perfect competition, monopolistic competition, oligopoly, and monopoly—and be able to identify which one applies to a given business. This lesson will define the four market structures and their key characteristics. Students will also learn how pricing decisions are impacted by the level of competition.

Objectives:

After completing this lesson students will be able to:

• define and describe the four market structures: perfect competition, monopolistic competition, oligopoly, and monopoly, along with their key characteristics.
• classify real-world businesses or entrepreneurs into the appropriate market structure based on their characteristics and justify the classification with specific reasoning.
• explain how different market structures impact an entrepreneur’s pricing, marketing, and business strategy decisions.

Voluntary National Content Standards in Economics

• Standard 9: Competition and Market Structure
  • Competition among sellers usually lowers costs and prices, and encourages producers to produce what consumers are willing and able to buy. Competition among buyers increases prices and allocates goods and services to those people who are willing and able to pay the most for them. 
• Standard 14: Entrepreneurship
  • Entrepreneurs take on the calculated risk of starting new businesses, either by embarking on new ventures similar to existing ones or by introducing new innovations. Entrepreneurial innovation is an important source of economic growth. 

 Concepts

Entrepreneurship, markets,  market structures