[MUSIC] Hi, Professor Navarro here again. At this point in the course, we are done with the basics of supply and demand, and consumer and producer theory. And it's time to move on to how industries and markets are organized. This is some of my favorite stuff in economics, and our goal over the next three lectures is to understand how industries are structured. And why different industries exhibit different kinds of market conduct and performance. Industry structure refers to how many firms are in an industry, whether the firms are big or small, what the firms cost structure looks like. And how market share is divided among the firms. The four major types of industry structure include, perfect competition as well as three forms of imperfect competition. Monopoly, monopolistic competition, and oligopoly. In this lecture, we will focus solely on perfect competition. It is the market structure by which economists measure all other market structures. And one of the goals of this lecture will be to understanding the implications of each of the major assumptions of perfect competition. These assumptions range from numerous buyers and sellers, and free entry and exit, to perfect information and homogeneous products. By learning about these assumptions, we will come to learn not only why the perfectly competitive market is efficient, but also how markets in the real world can fail. When one or more of the restrictive assumptions of perfect competition fail. This concept of market failure is key to understanding why government may sometimes intervene in the free market. [SOUND] The next three lectures are where the rubber meets the roads. It's where we put together everything we've learned about consumers, and producers, and supply and demand. The goal is to understand how american industries are structured and why different industries exhibit different kinds of market conduct and performance. Industry Structure refers to how many firms are in an industry. Whether the firms are big or small, what the firms cost structure looks like, and how market share is divided amongst the firms. The major types of industry structure include, perfect competition as well as three forms of imperfect competition; monopoly, monopolistic competition and oligopoly. In this lecture we'll study perfect competition then in the next two lectures we will turn to imperfect competition. As we study perfect and imperfect competition, it will be useful to keep in mind one of the key conceptual tools of traditional micro economics. The structure-conduct-performance paradigm. The central concept driving this paradigm is that industry structure determines market conduct, and market conduct in turn helps determine market performance. Market conduct embodies the various pricing and marketing tactics and strategies of businesses. Such conduct includes at what level a firm or industry sets its price and output. It also includes whether that firm or industry engages in various kinds of non-price competition through product differentiation and advertising. These different kinds of market conduct in turn drive market performance. Where performance is measured by yardsticks, such as allocative and productive efficiency. These yardsticks can tell us how well or poorly a society's resources are being used. This figure highlights some of the key features of the structure, conduct, performance paradigm. Please study it carefully before moving on to our analysis of perfect competition.
