Economics for Managers

to Philip Leatherwood

from Akberdiyeva Manar

(20001002)

A Case Study of Market Types

During the existence of planned economy there was no market of TV advertising. And reasons for that are known. With transition to market economy, producers faced with necessity to promote their products to the market. One of the effective way is advertising, especially through TV.

At present time this market is developing and in Kazakhstan it is presented by relatively large number of channels. Each channel has a comparatively small percentage of the total TV ad. market, so each has a very limited amount of control over market price. Market share of each local channel in the market of TV advertising is presented below.

Special feature of the market of TV ad. in Kazakhstan is that there is no feeling of mutual interdependence among producers (TV channels); each firm determines its policies without considering the possible reactions of rival firms.

Price for advertising is different from channel to channel and depends on the prestige of the channel ² Kazakhstan - 1² , ² KTK² and ² Khabar² have the highest prices among other local channels - on average $ 12- 15 per second of broadcast.

Advertising is differentiated in term of advertising themselves and their guality. More frequent items of advertised products are the following.

• Food
• Audio, video and communication techniques
• Medical remedies
• Clothe and shoes
• Home appliances
• Tobacco products
• Auto and moto techniques

Recently the tender for the sale of TV frequencies has been held. It stands for the fact, that in Kazakhstan the market of TV channels and the market of TV advertising as well are characterized by relatively easy entry.

1. Under which of market situation (pure competition, pure monopoly, monopolistic competition, oligopoly) does the market of TV advertising most accurately fit? Explain.
2. Study the reasons why the market of TV advertising did not exist during the existence of planned economy?
3. Assume this market existed during the existence of planned economy. What can you conclude about the market situation concerning the given example? Explain.
4. Consider under what market situation do local TV channels exist?

1. The monopolistically competitive firm has fewer rivals and the products of its rivals are close but not perfect substitutes. _______
2. Barriers to entry may permit a monopolistically competitive industry to acquire economic profits even in the long run. _______
3. Economic efficiency requires the triple equality of price, marginal cost, and average cost. _______
4. While product differentiation adapts the product to consumer demand, advertising adapts consumer demand to the product. _______

1. If a monopolistically competitive firm cuts the price of its product by 20%, in response to this other firms

1. will significantly decrease their prices too
2. will slightly reduce their prices too
3. will not undertake any actions
4. will increase their prices slightly

1. All those firms are considered to be monopolistically competitive except

1. men’s and boys’ suits and coats producing firm
2. primary aluminum producing firm
3. book publishing firm
4. footwear (except rubber)