What is a market structure?

A market structure describes the competitive environment in which a business operates, determined by the number and size of firms, the nature of the product, barriers to entry, and the degree of information available to buyers and sellers.

Why are firms in perfect competition described as price takers?

Because there are many small firms selling identical products with perfect information, so no individual firm can influence the market price and must accept the prevailing price.

Why do firms in monopolistic competition have some price-setting power?

Because they sell differentiated products, which allows them to distinguish themselves from competitors and reduces direct price competition.

CCEA AS-Level Business 3210

Enterprise and Entrepreneurship

Topic overview Business enterprise and the four factors of production The entrepreneur: motives and characteristics

The Central Purpose of Business Activity

Topic overview Adding value, and cost versus differentiation advantage How value is added, and how competitive advantage is achieved

Forms of Business Ownership

Topic overview Sole traders, partnerships and limited companies Franchises, the third sector, and the divorce of ownership from control Sole traders and partnerships Limited companies and franchises Social enterprise, liability, and business use of social media

Stakeholder Groups

Topic overview The stakeholder groups and what each wants Internal and external stakeholders, and managing conflict between them Stakeholders and social media

Markets and Market Forces

Topic overview Types of market, and mass versus niche Demand in each market, and the effect of market features on business Types of market and market share reviewed Demand and supply curves, and what shifts demand What shifts supply, and shifts versus movements Demand and supply

Quality Management

Topic overview What is quality?Total quality management, quality assurance and quality control defined The advantages and disadvantages of TQM The advantages and disadvantages of quality assurance and quality control ISO 9000 certification and the quality policy Quality control and quality assurance reviewed TQM, control and assurance compared The approaches to quality, and the case for and against TQM Quality control and quality assurance weighed ISO 9000 certification, and how quality is measured Quality as a dimension of competitiveness

Productivity and Investment

Topic overview The methods of production, and what determines productivity Innovation, research and development, and the need for investment Production methods, and what determines productivity Innovation, research and development, and organisational design

Organisational Design

Topic overview Hierarchy, span of control, chain of command and delegation Centralised, decentralised, tall, flat and matrix structures Centralisation versus decentralisation, delayering, and the effects of design Centralisation and decentralisation weighed Tall and flat structures weighed Outsourcing Centralisation, structure and outsourcing

Investing in People

Topic overview Succession planning, skills audits and the factors behind people investment The benefits and drawbacks of investing in people Methods of recruitment and selection Training and appraisal methods Online recruitment and selection Online training and appraisal Induction training: content, benefits and drawbacks On-the-job training: methods, advantages and drawbacks Off-the-job training: methods, advantages and drawbacks Continuing professional development Choosing a training method Internal and external methods of recruitment Internal versus external recruitment weighed The stages of selection, and the methods used Psychometric testing: what it measures and what it misses Psychometric testing The purpose of appraisal, and its benefits and drawbacks Technology in the appraisal process Online recruitment and selection technology Online training and appraisal technology The benefits and drawbacks of online HR processes

Motivation

Topic overview Taylor's scientific management and Maslow's hierarchy Herzberg's two-factor theory, and the limits of each theory Taylor and Maslow reviewed Herzberg's hygiene factors and motivators in detail Monetary and non-monetary methods of motivation Leadership styles, and choosing a method of motivation The monetary methods of payment The monetary methods weighed, and calculating commission Job design, empowerment, team working and flexible working Recognition and development, and how non-monetary methods link to theory

Principles of Management and Leadership

Topic overview The four leadership styles described How each style affects motivation Management versus leadership, and choosing a style The styles and their motivational effects reviewed Management, leadership and style selection reviewed

Market Size, Share and Growth

Topic overview Measuring market share, market growth and market size What a high share brings, and what each formula term means

The Degree of Competition in a Market

Topic overview The four market structures What determines the degree of competition

Market Research

Topic overview Reasons for market research The primary research methods, and primary versus secondary data Questionnaires, interviews and observation weighed Focus groups and consumer panels weighed Test markets, loyalty cards and the survey methods Sampling Qualitative and quantitative research

The Marketing Mix

Topic overview The seven elements, product, and the pricing strategies Promotion and place People, processes, physical environment, and aligning the mix

Elasticity of Demand

Topic overview Price and income elasticity defined, and the effect on revenue Calculating and interpreting price elasticity, and what determines it Income elasticity, cross elasticity, and the limits of elasticity values

The Product Life Cycle

Topic overview The four stages of the product life cycle Extension strategies, portfolio balance, and the limits of the model

Market Planning and Strategy

Topic overview SWOT analysis in the marketing plan Marketing plan Demographic and geographic segmentation Psychographic and behavioural segmentation The benefits and limits of segmentation, and what makes a segment usable

E-Business and E-Commerce

Topic overview E-business, digital advertising, market research and sales channels Social media, mobile marketing, and the benefits and limits of e-business E-business channels and mobile marketing reviewed The benefits and limitations of e-business, and social media marketing

Sources of Finance

Topic overview Internal and external finance, and debt versus equity The individual sources of finance, and their advantages and limits

Break-Even Analysis

Topic overview The break-even chart, contribution and the margin of safety How cost and price changes move break-even, and target profit The uses and limitations of break-even analysis

Cash Flow

Topic overview Difference between cash and profit Cash flow problems, the working capital cycle and credit control Improving cash flow, and the long-term cost of each method

Cash Flow Forecasts

Topic overview The cash inflows and outflows of a forecast Net cash flow, closing balance, and the uses and limits of a forecast

Budgeting

Topic overview What a budget does, and fixed versus flexible budgets Favourable and adverse variances calculated Investigating variances and management by exception Preparing and using a flexed budget

Financial Statements

Topic overview The income statement and the statement of financial position Calculating and interpreting the ratios, and the limits of final accounts Current and non-current assets and liabilities

The Degree of Competition in a Market

2 subtopics
6 things to know
Unit AS 2

What The Degree of Competition in a Market covers

The degree of competition in a market is examined in Unit AS 2, Growing the Business. It covers the four market structures and what determines the degree of competition.

Where it is assessed

Unit AS 2

Growing the Business, written examination, 20% of A level.

Check the CCEA specification ↗

The 2 subtopics

Each one has its own page. CCEA AS Business students sit this topic in the first year.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

How do the number of firms, fresh entry, barriers to entry and consumer information each affect competition?

Key term

What happens to competitive pressure when price comparison gets easier, and how does government reach into a market?

Key term

What are the four key factors that determine a market structure?

Key term

Define perfect competition.

Key term

Define oligopoly as a market structure.

Key term

How does the number of firms in a market affect the degree of competition?

Take The Degree of Competition in a Market further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

Perfect competition vs Oligopoly
Perfect competition: many firms selling an identical product, none able to influence price. Oligopoly: a few large firms whose decisions turn on what rivals will do.
Barriers to entry vs Product differentiation
Barriers to entry: obstacles such as high start-up costs and brand loyalty that keep new firms out. Product differentiation: making an offering distinct so buyers are less sensitive to its price.

Questions from this topic

Each one with the model answer underneath.

1
What is a market structure?
Model answer
A market structure describes the competitive environment in which a business operates, determined by the number and size of firms, the nature of the product, barriers to entry, and the degree of information available to buyers and sellers.
2
What are the four key factors that determine a market structure?
Model answer
The number and size of firms, the nature of the product, barriers to entry, and the degree of information available to buyers and sellers.
3
Define perfect competition.
Model answer
A market structure characterised by many small firms, homogeneous products, no barriers to entry or exit, perfect information, and firms being price takers.
4
Why are firms in perfect competition described as price takers?
Model answer
Because there are many small firms selling identical products with perfect information, so no individual firm can influence the market price and must accept the prevailing price.
5
Why do firms in monopolistic competition have some price-setting power?
Model answer
Because they sell differentiated products, which allows them to distinguish themselves from competitors and reduces direct price competition.
6
Define oligopoly as a market structure.
Model answer
A market structure dominated by a small number of large firms, with high barriers to entry, interdependent decision-making, and products that may be differentiated or homogeneous.

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Enterprise and Entrepreneurship

The Central Purpose of Business Activity

Forms of Business Ownership

Stakeholder Groups

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A ratio.

profitabilityliquiditygearing

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AMarket growth = ((1950 − 1450) ÷ 1450) × 100 = 34.5 %.

BSales volume is the total quantity of units sold in a market.

CSales value is the total revenue generated from sales in a market.

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The Degree of Competition in a Market revision questions

Is The Degree of Competition in a Market examined at AS in CCEA Business?: Yes. It sits in Unit AS 2, which you take in the first year, so it is on the AS paper as well as counting towards the full A level.
What does The Degree of Competition in a Market cover in CCEA AS-Level Business?: 2 subtopics: the four market structures and what determines the degree of competition. Each one has its own page with questions and model answers.
How is The Degree of Competition in a Market organised?: By the CCEA 3210 specification, subtopic by subtopic, so it matches the order you are taught it in.

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