Syllabus: AQA - AS and A Level Economics
Module: 3.1.4 Competitive and Concentrated Markets
Lesson: 3.1.4.1 Market Structures

Introduction

This section of the AQA AS and A Level Economics specification (3.1.4.1) introduces students to how different market structures operate in theory and practice. From perfect competition to monopolies and oligopolies, it offers foundational knowledge for evaluating real-world business behaviour and pricing strategies.

This topic is a vital bridge between economic theory and how businesses actually compete. It aligns with broader curriculum goals around microeconomic analysis, decision-making, and applying models critically. For teachers and students alike, understanding market structures sharpens analytical thinking and provides clear relevance to both assessments and future careers.

Key Concepts

Students need to explore and distinguish between various market structures. According to the AQA specification, they must understand the following:

• Characteristics of Perfect Competition: Many buyers and sellers, homogeneous products, no barriers to entry or exit, perfect information, and price takers.

• Monopolistic Competition: Many firms, product differentiation, some price-setting power, relatively low barriers to entry.

• Oligopoly: Few dominant firms, high barriers to entry, potential for collusion or non-price competition, interdependence between firms.

• Monopoly: Single seller dominates the market, price maker, high barriers to entry, potential for economies of scale and market failure.

• Contestable Markets: Even monopolies may behave competitively if there is a threat of new entrants.

• Revenue and Efficiency: Comparison of allocative and productive efficiency across market structures.

• Diagrammatic Analysis: Including AR, MR, and cost curves under different scenarios.

Students must be able to compare these models, understand their assumptions and limitations, and apply them to current markets.

Real-World Relevance

Understanding market structures is not just about theory. It gives students the tools to make sense of business behaviours they encounter every day:

• Supermarkets and petrol retailers in the UK often reflect oligopolistic behaviours — a few key players, price-matching, and non-price competition.

• The rail sector is often cited as a monopoly due to high barriers to entry and limited competition on many routes.

• Streaming services such as Netflix, Disney+ and Amazon Prime compete in a monopolistically competitive market — product differentiation is key, but pricing power is limited.

• The UK broadband market, dominated by BT, Sky, and Virgin Media, also shows classic oligopoly traits, including heavy advertising and bundled deals.

These examples help students anchor abstract models in daily life and news headlines — essential for both understanding and exam application.

How It’s Assessed

Students are expected to demonstrate:

• Diagram use: Accurate labelling of AR, MR, AC, MC, and equilibrium outcomes across market structures.

• Written analysis: Using exam command words like explain, analyse, evaluate.

• Application: Relating theory to contemporary examples or case studies.

• Extended answers: Often 15-25 mark questions asking for evaluation of efficiency, market power, or real-world applicability.

Assessment may also include multiple-choice questions on definitions, and short-answer data response questions using market scenarios. Critical use of evidence and balanced argumentation is key.

Enterprise Skills Integration

This topic is rich in opportunities to develop active learning and enterprise-relevant skills:

• Decision-making: Students evaluate market entry strategies or pricing tactics based on structure.

• Problem-solving: Applying theory to ambiguous or mixed-structure markets.

• Critical thinking: Comparing theoretical assumptions with real-world behaviours and outcomes.

• Numeracy and logic: Working with revenue and cost curves, calculating efficiency or profitability.

Enterprise Skills’ Business Simulations offer a strong plug-and-play option here. Students can experience the consequences of pricing decisions or product differentiation within a simulated market — perfect for embedding understanding and developing confidence.

Careers Links

Market structures directly support Gatsby Benchmarks 4, 5, and 6:

• Benchmark 4 (Linking curriculum learning to careers): Understanding market structures gives students context for roles in finance, retail, business consultancy, and economics.

• Benchmark 5 (Encounters with employers): Simulations and guest speakers from industries like FMCG or telecoms can illustrate how real businesses navigate competitive environments.

• Benchmark 6 (Experience of workplaces): Use case studies from actual firms to show workplace decision-making — e.g., pricing strategy in a competitive vs monopolistic setting.

Career pathways include:

• Business Analyst

• Marketing Executive

• Policy Advisor

• Competition Economist (CMA)

• Strategic Consultant

Teaching Notes

Top tips:

• Use comparative diagrams side by side to show efficiency or welfare outcomes clearly.

• Provide current case studies to practise evaluation — especially in oligopoly vs monopoly debates.

• Use class debates or simulations to mimic real decision-making in different market structures.

Common pitfalls:

• Students confusing monopolistic competition with monopoly — highlight differences in entry barriers and pricing power.

• Misapplication of diagrams — ensure curves are correctly drawn and explained.

Extension activities:

• Task students to analyse a chosen industry and classify its market structure, with justifications.

• Run a Business Simulation where students experience the pressures of entering a competitive or concentrated market, making decisions on price, product, and strategy under constraints.

Plug-and-play support:
Enterprise Skills’ tools can drop into this unit with minimal prep — whether to kick off the topic with simulation or wrap it up with applied revision. This isn’t about adding workload, but helping students “learn by doing” — and it sticks.