The Main Categories of Market Structures Essay - 1668 Words

The Main Categories of Market Structures Recent industry analyses typically have strong relation with economic theories. There is a theory, belongs to microeconomics, divides industries into categories according t the degree of competition that exists between the firms within the industry, i.e. the theory of Alternative Market Structures. This essay based on three questions divides into 3 parts to explain and evaluate the questions. This essay (PART A) outlines the main categories of market structures, and shows the theoretical features of two of them, i.e. Perfect Competition and Oligopoly. This essay (PART B) evaluates upon the most relevant structure in regard to the UK supermarket industry. This essay (PART C)†¦show more content†¦There is a freedom of entry into and exit from the industry firms. There are no significant financial, legal, technological or other barriers to new firms entering the industry or existing firms leaving it. 3. All firms in the industry sell identical/homogenous product. It makes perfect competition so extremely competitive and so rare. The important thing is that the product of a firm is considered by the buyers to be the same as that of any other firm. This ensures that no buyer has any economic incentive to pay any firm higher price for the product than is charged by other firms. 4. Each firm is a price taker and has no influence on the market price. They are unable to affect the prices by changing the amount of product that is offers for sale (Fig 1). This is because the output is such a small portion of total industry supply that has nearly no effect on market supply. Therefore the firm has to be a price taker; otherwise, it will reduce profit. In the real world the perfect competition is rare. The model of perfect competition serves usually as a benchmark of economic efficiency against which real world markets can be measured. Nevertheless, it is still beneficial to study it as a model. Market power refers to the ability to influence price of a product. In a perfectly competitive market, there is little market power for producers. In contrast, Oligopoly refers to a market where a few large firms sell a product that may be alike orShow MoreRelatedProcter Gambler: Organisation1063 Words   |  5 PagesCase: Procter Gamble: Organization 2005       1.Why did the US organizational structure shift from product grouping in the 1950s to a matrix in the 1980s? Why did the European organizational structure shift from geographic grouping in the 1950s to category management in the 1980s? 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