In this essay, I will be focusing on market structures. It will be divided into two sections in section 1 I will be explaining and discussing the four market structures, namely Perfect competition, Monopolistic Competition, Oligopoly and lastly Monopoly.
Each of these market structures will be discussed in depth examples of these markets will be provided. As to how prices are set and how profits are determined. The markets demand curves will be illustrated in detailed based on their sales. I will also differentiate the difference between the four market structures.
In section 2 I will be debating ”real estate brokerage industry as a monopolistically competitive market structure”. In my debate, I will give my views and understanding on this statement. I will be reasoning my point of view and will provide practical examples to support my statement.
Perfect competition is a market structure that consists of a large number of small firms. The product sold in this market are identical products. This market is like a sheep farmer. There are no barriers to entry in the perfect competition. If you have capital and you want to sell what John’s shop sells you can go ahead without anyone’s approval. Your prices must be clear and visible so that your consumers know to do good a comparisons shopping and be able to match prices well with your competitors. As a result, consumers will be reluctant to buy from a supplier who charges a price that is higher than a market price.
There are many suppliers in this market, therefore it is quite easy for new suppliers to enter this market structure and for others to exit the market structure without affecting the demand and supply curve. A supplier does not need a large amount of capital to start a business in this market structure.
In a perfect comparative market, all production factors are mobile, all sellers and buyers have complete knowledge of the market conditions. There is no government intervention to influence the decisions of buyers & sellers and all suppliers act independently.
Monopolistic competition is either dominated by a few large suppliers or by many small suppliers that sell different ranges of the same products. Many suppliers compete with each other in this market structure. The supplier’s products differ slightly but are close substitutes for each other.
A very good example I am going to use its running shoes, we get a wide range of running shoes with different names. They all deliver the same service but only differ when it comes to cost, customer satisfaction, taste, and quality.
Take for instance the NEW BALANCE running shoe has been used by more athletes over the years but when ASICS introduced its new GEL range and modernized its runners. NEW BALANCE lost more customers and it resulted in less profit for the firm. The action of ASICS had a negative effect on the market prices of NEW BALANCE.
Suppliers in this market compete by producing better products than their competitors. Product differentiation provides the suppliers to have control over price, in the monopoly market structure. Suppliers can charge different prices for their products to convince their customers. When more suppliers enter this market the current suppliers’ demand will decrease.