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Word Count: 703
1 Oligopoly is when a particular market is controlled by a small group of firms For example supermarkets there are three there usually exist three companies companies which dominate the market Wong and Metro Santa Isabel and Plaza Vea and Tottus The main assumptions that economists make when talking about a situation of Oligopoly are various three or four large companies dominate the industry but small companies do exist smaller companies in the recent example would be for example Arakaki a sole trader company firms are interdependent al will watch what the competitors do and act accordingly when Wong created the Bonus card it did not even passed a week when Santa Isabel created the M M card the existence of the kinked demand curve which we will see what it is on question b there are barriers to entry this means it is difficult for other firms to enter the industry non price competition as companies cannot compete by prices therefore they have to compete with the service they offer for example the Bonus and the M M cards the oligopoly must be collusive collusion this means when the companies which dominate work together to maintain very high prices at the expense of the consumer for example Umbro and Adidas sell football shirts at very high prices as a Manchester United shirt costs approximately 50 companies which work together to maintain high prices should be fined as it is illegal Advertising is also essential to maintain a high profit and market share and also something very important which is to develop brand loyalty for example once I began to buy Sony electro domestics I begin to have a brand loyalty as I never had a single problem with them 2 The causes of price stability when prices are stable without any change existing in a situation of Oligopoly are two The first reason is due to the shapes of the Demand curve AR
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