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Market Structures

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Myla Rose Acoba
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21 views3 pages

Market Structures

Uploaded by

Myla Rose Acoba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Market structures are the key points in evaluating business' economic

environments. It deals with strategic decision making and focuses on both


economics
and marketing, making professional entrepreneurs precisely judge industry, policy
changes, and market news. The significant operational definition of market structure
is a concern to both economists and marketers since they have different
methodological approaches in this, and each of them has their strengths and
weaknesses.
Moreover, these are the most notable characteristics of market structures:
 The relationship between a seller to another seller, a seller to his/her buyer,
and many more.
 The product that has been sold and the extent of product differentiation,
which affects cross-price elasticity of demand.
 The number of companies or corporations, including the scale and range of
international competition, in the market.
 The concerns in entering and exiting the market.
 The dissemination of market shares for the largest firms
 The number of buyers and how they behave to mandate a product's price and
quantity.
 The turnover of customers which can be affe cted by the extent of consumer or
brand loyalty and the influence of persuasive advertising and marketing.

The interactions and variations in these aspects provided the existence of different
market structures which are the following:
 Monopoly. Herein, there is a single merchant of a product for which there is
no close alternative.
 Monopolistic Competition in which differentiated product has many
vendors.
 Perfect Comnpetition, wherein, a similar product has many sellers.
 Oligopoly, whereupon, there are few sellers a standardized or a
differentiated product.

A MONOPOLY pertains to a situation wherein there is only a single company


that produces a certain product in the entire market. Because of that, they have
the power or the authority to manipulate their products, such as minimizing their
outputs to put higher prices in it and to gain more profit. In this situation,
consumers havea lesser benefit, especially when the product is essential to them,
making them buy it despite being expensive.

Monopolies commonly emerge because there is a high barrier to entry and exit ir
a particular market.

The three main FACTORS that can become the reason for it are the following.
 Ownership of a fundamental resource - If the key resource is solely owned
by a firm, the fim can limit the access to this source, therefore creating a
monopoly.
 Economies of scale - In some sectors, a single firm can sustain products or
goods at a lower price than two or more firms could, resulting in a natural
monopoly, which arises even without the intervention of the govemment.
 Government Regulation -To suffice the interest of the public, the
government
usually restricts market entries in a legal way, which is through copyright
laws and patents.

Frankly said, MONOPOLIES are usually unwelcomed to society because it can


cause
deadweight loss producing lesser outputs than the competitive ones, yet still, have
higher prices. However, the government can react to these by demanding price
regulations, establishing competition laws, nationalizing the monopolies, or by not
doing anything at all.

2. MONOPOLISTIC COMPETITION
When there is a numerous quantity of small firms competing against each
other, it is called a MONOPOLISTIC COMPETITION. However, in this type of market
structure, several companies sell the same product but they have their differences.
Those differences give them market power which lets them charge higher prices for
a product, but is within a certain range. These key factors can include style, brand
name, location, packaging, advertisement, and pricing strategies, which
became
firm's basis in marketing.

You can assume the following when discussing the MONOPOLISTIC


COMPETITION:
 Every firm is a price setter and can maximize their profit.
 They sell similar yet slightly different products.
 The consumers can favor a product more than the other one.
 There are easy entrances and exit in this market.

This type of market structure can be observed in reality. Some of the common
examples are:
 Cap'n Crunch, Lucky Charms, Froot Loops, and Apple Jacks, which are all
companies that sell breakfast cereals with small differences.
 McDonald and Burger King, which both sell slightly different burgers
 Nike and Adidas, which both sell running shoes, but are different in some
ways.

3. PERFECT COMPETITION
PERFECT COMPETITION is a type of market structure where many products are
similar and may substitute each other since they have the same features, price and,
quality. There are many sellers and consumers in this type of market with almost
the same products. Moreover, a perfectly competitive market requires few barriers to
enter and it is easy for producers to quit whenever they want. They also have
uniform
prices that depend on the demand and supply which means that the market has full
control over implying prices.
Perfectly competitive markets show these characteristics:
 Both the producers and consumers have perfect knowledge without
information failures. The details and information in this market are easily
accessible to all participants. Thus, risk-taking is not necessarily important
and the power of an entrepreneur is limited.
 Producers and consumers are making coherent decisions for their benefit. For
instance, producers make decisions to maximize their profits, and consumers
make decisions to maximize their utility.
 There are no hindrances to enter nor exit from this type of market.
 Companies manufacture identical products that are not branded.
 Producers don't have the power to influence the market price nor the
condition.

3. OLIGOPOLY
An OLIGOPOLY is a type of market structure where firms dominate the market
by supplying either similar or differentiated products. There are only a few
companies
in this structure and they have control over price implying. It is also difficult to enter
this market since there are a lot of barriers. Moreover, participants in oligopolies are
price setters rather than takers. Some EXAMPLES OF OLIGOPOLY COMPANIES
are the automobile industry, the steel industry, aircraft manufacturing industry, Mass media
company, oil and gas company, Cellular phones company, Pharmaceuticals company,
Computer Company, Network providers and etc.

Oligopoly markets show these characteristics:


 Entrepreneurs maximize profits.
 Oligopolies set prices rather than take price.
 There are a lot of barriers. It includes government licenses, economies of
scale, patents, and access to expensive and complex technology. Also, some
government policies are favoring the current comnpanies in the industry so it
is hard to enter for beginners.
 Interdependent. Like for example, if one firm change and decreases its price,
it will significantly affect the other firms.
 Rampant advertising since most companies use national media to promote
their products.

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