Concentration Ratio

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    A concentration ratio measures the combined market share of the largest ‘N’ firms in an industry.

    A four firm concentration ratio of 97% is written:

    This means the largest 4 firms own a combined market share of 97%.

    A concentrated market is one in which a few large firms dominate. A few large produces have a large market share. is high.

    A diluted market is one in which there are many small firms. There is a lot of competition and no firms dominate the market. is low.

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