Thursday, 13 March 2014

The Two Market Structures at the Extreme

Have you ever wondered why some markets possess the ability to influence economic activities in their ventures and some don't? Anyway, the aforementioned scenarios depend on the characteristics of the market in question. If you are the sole provider of your product, then you are a monopolist. If you are on the other side of the spectrum, you take your market price as given because many other suppliers selling similar products as you, have invaded the market. This means you are operating in a perfectly competitive market.

 The following classifications will help you identify the type of market in which you are operating:
Characteristics
Perfect competition
           Monopoly
Price determination


Nature of product


Number of sellers


Influence over price


Barriers to entry


Shape of the demand curve


The ability to make economic profit in the short run and long run


How to determine when  markets are making normal profits/economic profits/losses


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4 comments:

  1. Unknown14 March 2014 at 00:30

    Very interesting post.

    ReplyDelete
  2. Abosede Ijabadeniyi15 March 2014 at 05:31

    Thank you Doc.

    ReplyDelete
  3. Unknown20 March 2014 at 00:41

    According to the textbook for a market to be perfectly competitive the following conditions must apply : There must be a large number of suppliers and sellers so that neither has influence on the price of the product
    The product traded must be homogeneous
    Location does not play a role in other words transport costs are assumed to be nonexistent
    free entry into or exit from the industry exists
    There is perfect knowledge of market conditions
    factors of production are perfectly mobile
    There is no intervention from the government

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