The banking industry in Australia is one example of an oligopoly.

1. Why is the banking industry in Australia considered to be an oligopoly?

2. Explain what would have to happen to the banking market for it to become more like perfect competition. What would you expect to happen to the price of banking services and the number of banking services if this was to occur?

3. On the other hand, it is possible that the big four banks could merge and form a banking monopoly. What would you expect to happen to prices and quantities if this occurred? Would this outcome be desirable from the point of view of consumers or banks?

4.If you think banks are boring and that all banking products are the same, would your price elasticity of demand for the services of one individual bank be elastic or inelastic? Explain why.