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Shape of Demand Curves, Barriers to Entry and Competition

Topic: Shape of Demand Curves, Barriers to Entry and Competition

The shape of demand curves firms face may change from one form of market structure to another. In addition, there are several factors that influence the nature of firms, including the level of competition they may be involved in or may not be involved in at a given period. Barriers also shape the nature of the various forms of market structures.

1. Why does a Starbucks coffeehouse face a downwardsloping demand curve while a dairy farmer has a horizontal demand curve? What other suppliers might face a downwardsloping demand curve?
2. How do barriers to entry impact the level of competitions in a market? What might happen to the market price as greater barriers to entry come into existence?
3. All barriers to entry are not created through market conditions. Barriers to entry, such as patents, licenses, or international trade restrictions, may be government imposed. How do governmentimposed barriers such as patents impact consumers and suppliers in these markets?

 

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