Economics for Business and Guidelines

Questions: 1. Compare the market structures of Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly? 2. Explain what Non-price competition means? 3. Explain the term mutual dependence and which market structure experiences it the most? 4. Which market structure do you think each of the following businesses belong to? Explain your choice? 5. Diagrams of demand curves facing two firms? Answers: 1. Perfect Competition 1. Number of firms in the market: In such market structure, there are many firms available on the market offering products to the consumers. 2. Similarity of the products sold: The firms offer similar types of products or services to the target demographics. Precisely, there are no perfect substitute products offered to the consumers. 3. Barriers to entry: In such perfect competition market structure, barriers to entry in the market are substantially low. Meanwhile, the entry of a new competitor will not impact the competitors market share in direct order Monopoly 1. Number of firms in the market: In a monopoly market structure, the number of producer or firm is only one. 2. Similarity of the products sold: Due to lack of product substitute, the producer or seller has sold exclusive products to the target demographics. 3. Barriers to entry: As the product manufacturer in such market structure has got exclusive product rights, any other competitor cannot make an entry in the market Monopolistic Competition 1. Number of firms in the market: The number of firms in such market structure is many. 2. Similarity of the products sold: Similarity of products is less as the products are manufactured for the same purpose, but are differentiated by different factors (Feenstra, 2016). 3. Barriers to entry: Barriers to entry are relatively low in compared to oligopolistic or monopoly industry Oligopoly 1. Number of firms in the market: In such market structure only a few organisations have created an industry.2. Similarity of the products sold: In an oligopolistic market structure, the products manufactured by the firms are nearly identical. 3. Barriers to entry: Due to lack of several competitors in the industry, the barriers to entry are significantly high such as in monopoly business (Layton, Robinson, Tucker, 2012). 2. Non-price competition is a particular market situation in which the industry contestants would not reduce the product prices to get distinct sales benefits (Symeonidis, 2010). Meanwhile, to stay competitive, competitors uses extensive marketing promotions. In a non-price competition, the industry competitors often engage in other significant means instead of lowering prices. First of all, extensive advertising can be identified as one of the most common concepts to become competitive in a non-price competition. Secondly, efficient marketing strategies have been implemented to draw the attention of the target demographics (Layton, Robinson, Tucker, 2012). On another note, quality customer services will be provided by the sellers to stay ahead in a non-price competition market. In this way, sales of the products and services can be increased without reducing the price. 3. Mutual dependence is termed as the interdependence of planning the pricing and product differentiation strategy of the firms operating in the same market. By considering the fact of interdependence, it can be seen that the oligopoly market structure experiences mutual dependence the most (Layton, Robinson, Tucker, 2012). The primary reason for the extreme level of mutual dependence is the few number of sellers and differentiated products. Any change in the strategy of one organisation impacts the strategies and planning process of the other firms. 4. 1. Coles Supermarket in my city belongs to oligopoly market structure becuase of few number of sellers. It is interdependent on other firms operating in the market. 2. A hair dresser salon belongs to perfect competition market structure due to a huge number of salons operating in the market with similar products and services. 3. Metro Trains in Melbourne and Sydney Trains belongs to monopoly market structure becuase they are the utilimate seller in the market and any new entry to the market is restricted (Layton, Robinson, Tucker, 2012). 4. National Australia Bank belongs to oligopoly market structure becuase there are few number of Banks in the market that offers differentiated products and services. 5. Academies Australasia Polytechnic belongs to oligopoly market structure becuase there are few number of polytechnic institutions in the market that offers differentiated products and services (Layton, Robinson, Tucker, 2012). 6. A small store that sells souvenirs such wallets, caps, tee-shirts, key chains in your citys Sunday market that has many such stores belongs to perfect competition market becuase of large number of sellers with similar products. 7. A car workshop in your city belongs to monopolistic competition becuase of large number of sellers in the market that offers differentiated services. It is a free to enter market for new entrants. 7. Iphone and Samsung in the mobile phone industry belongs to oligopoly market structure becuase of few number of sellers and differentiated products. It is comperatively difficult for new entrants to start business in the mobile phone industry becuase of a large investment. 5. Diagram A Diagram B By considering the two diagrams given above, it can be seen that diagram A represents inelastic demand curve and diagram B represents elastic demand curve. The application of the above diagrams to two different market structures has been presented herein below: Monopolistic Competition: The diagram B is an elastic demand curve that belongs to monopolistic competition market. In a monopolistic competition, any changes made by a firm will highly impact its sales because of the high level of competition and product differentiation in the market (Yomogida, 2010). Hence, the demand curve in the monopolistic competition market is elastic but not perfectly elastic. Oligopoly: On the other hand, any changes made by the firm in an oligopoly market will make other firms to do the same kind of change in its strategy. For example, if firm A reduces the price of its products, the firm B will also do the same to compete and survive in the market (Yomogida, 2010). Hence, the changes made in the price will not impact its demand by a high range. Hence, the demand curve in an oligopoly market is inelastic in nature. References Feenstra, R. (2016). Gains from Trade Under Monopolistic Competition.Pacific Economic Review,21(1), 35-44. Layton, A., Robinson, T., Tucker, I. (2012).Economics for Today(1st ed.). South Melbourne, Vic.: Cengage Learning Australia. Symeonidis, G. (2010). Price and Nonprice Competition with Endogenous Market Structure.Journal Of Economics Management Strategy,9(1), 53-83. Yomogida, M. (2010). Fragmentation and Welfare in Monopolistic Competition.Review Of International Economics,18(3), 531-539.