Professor Birks: Perfectly Competitive Market Structure
Assume now that Professor Birks faces the demand curve below (note the cost function is the same as before):
7. What type of market do you think Professor Birks is now operating in? Explain your answer fully (3 marks).
Q P TC TR PROFITS AR MR MC
0 5 400 0 -400 - - 0
100 4.8 420 480 60 4.8 4.8 0.2
200 4.6 480 920 440 4.6 4.4 0.6
300 4.4 580 1320 740 4.4 4 1.0
400 4.2 720 1680 960 4.2 3.6 1.4
500 4 900 2000 1100 4 3.2 1.8
600 3.8 1120 2280 1160 3.8 2.8 2.2
700 3.6 1380 2520 1140 3.6 2.4 2.6
800 3.4 1680 2720 1040 3.4 2 3.0
900 3.2 2020 2880 860 3.2 1.6 3.4
Professor Birks is now operating in an imperfectly competitive market structure; potentially a monopoly, oligopoly or monopolistic market structure. It is evident that the market is no longer perfectly competitive from the table as now average revenue is no longer constant meaning Professor Birks now has the ability to act as a price maker …show more content…
Creating combinations of services with attractive prices at a discounted rate. A possible combination could be eyebrow waxing with haircuts. This will attract customers to spend their money on multiple products and services at once and exposes clients to the other services you offer in the salon that may usually not spend money on.
Another source of revenue could come from selling hair care products used on clients in store. Such products are usually sold to salons at a reduced rate by wholesalers and so there is profit to be made off these if they are then resold on to clients for a much higher price. Clients can be encouraged to buy these products in future by offering free samples.
Advertising and marketing are particularly important for firms operating under monopolistic competition. Since firms are competing for the same clients in a local area, it is essential that advertising and marketing are successful and effective as to show demonstrate their company’s
7. What type of market do you think Professor Birks is now operating in? Explain your answer fully (3 marks).
Q P TC TR PROFITS AR MR MC
0 5 400 0 -400 - - 0
100 4.8 420 480 60 4.8 4.8 0.2
200 4.6 480 920 440 4.6 4.4 0.6
300 4.4 580 1320 740 4.4 4 1.0
400 4.2 720 1680 960 4.2 3.6 1.4
500 4 900 2000 1100 4 3.2 1.8
600 3.8 1120 2280 1160 3.8 2.8 2.2
700 3.6 1380 2520 1140 3.6 2.4 2.6
800 3.4 1680 2720 1040 3.4 2 3.0
900 3.2 2020 2880 860 3.2 1.6 3.4
Professor Birks is now operating in an imperfectly competitive market structure; potentially a monopoly, oligopoly or monopolistic market structure. It is evident that the market is no longer perfectly competitive from the table as now average revenue is no longer constant meaning Professor Birks now has the ability to act as a price maker …show more content…
Creating combinations of services with attractive prices at a discounted rate. A possible combination could be eyebrow waxing with haircuts. This will attract customers to spend their money on multiple products and services at once and exposes clients to the other services you offer in the salon that may usually not spend money on.
Another source of revenue could come from selling hair care products used on clients in store. Such products are usually sold to salons at a reduced rate by wholesalers and so there is profit to be made off these if they are then resold on to clients for a much higher price. Clients can be encouraged to buy these products in future by offering free samples.
Advertising and marketing are particularly important for firms operating under monopolistic competition. Since firms are competing for the same clients in a local area, it is essential that advertising and marketing are successful and effective as to show demonstrate their company’s