The only thing that affects the price of the product is the demand and supply of the product. In such a situation, the consumers benefit.
They have a high variety of sellers to choose from who are constantly trying to find ways to minimize their prices so that the customers buy from them. In this struggle, the customer ends up finding the lowest price. Also, in a perfectly competitive market, there is high potential for innovation. As the sellers and producers aim to minimize their costs in order to lower their prices, they invest money in research and development and, hence, the state experiences innovation and technological advancements.
A perfectly competitive market, however, is not the best place for a seller. Due to fierce competition and lack of market power, sellers experience low margins of profits on the goods they sell (Case and Fair). Moreover, producers must constantly be on their toes to monitor the performance of their competitors and must try and stay a step ahead of them. In perfect competition, producers and seller try and differentiate their offerings through advertisements and creating brands. Again, they must do this through incurring marketing expenditures which would further increase their costs and make the environment very risky for them.
The dynamics of a monopolistic market are the opposite as compared to a perfectly competitive market. If a perfectly competitive market were to transform into a pure monopoly, it would become a very stress free zone for the firm. In a pure monopoly, the firm would have complete control over the price of the product. Also, because there are no competitors, it does not need to worry about the customers switching to another seller. It is purely to the firm’s discretion what price it wants to set for the product. (Case and Fair)
Needless to say, the customers have to suffer in such a setting. The long list of
They represent completely different market structures and effect their environment to a great extent. This paper will then shed light over the changes that a market would go through if it were transformed from a…
The author of the essay comments on the concepts of micro economics and macro economics. To be precise, the author provides the idea of Samuelson, who states that economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.
Government Regulation and Monopoly Power
It is axiomatic that people with like interests work together to further those interests. It comes as no surprise that these people will attempt to lobby legislative or rule-making bodies to create special protective legislation for them.
The research delves into monopolistic competitive market. The mere mention of monopolistic competitive shows that there are many small competitors in the same market. The competitors sell different products that can fill the same need. For example, the grocery store sells different brands of cheese.
As it is shown in the essay, monopoly is a market structure where there is a single producer or seller of the product in the market with no substitutes available. The paper focuses on uncovering of the relative inefficiencies of the monopoly market, compared with other structures. This market produces less output with higher prices.
The author states that one of the key points covered in the article include the objections against a monopoly as understood by the economists. The argument against monopoly is that in the absence of competition, monopolies can charge whatever they want and the charged prices are usually higher than the prices under perfect competition.
Under free trade environment the market itself fixes the price whereas in the Monopoly structure the monopolist being the only supplier fixes the price at which goods or services will be provided. In the monopolist market structure there are no close substitutes to the product or service the monopolist deals with and there are different barriers to enter the market.
In three years time the patent on the “Neutron” expires and another competitor enters the market making the market an Oligopoly. After a few years, since Quaser faces Monopolistic competition, it has to change its pricing and marketing strategies as there are more competitors and less possibilities of controlling the price
In addition, this paper will tell Oligopoly theory gives us a rather confused picture of the relationship between economic profits and market structure" Has empirical investigation of this relationship helped us to clarify the picture? Why might it be argued that it takes only a few rivals competing in the same market to achieve an outcome very close to that of large numbers 'perfect' competition? Does it make much difference if the rivals can cooperate with one another?