Next Page Price determination is one of the most crucial aspects in economics. Business managers are expected to make perfect decisions based on their knowledge and judgment. Since every economic activity in the market is measured as per price, it is important to know the concepts and theories related to pricing.
John Blackburn Market Structure 1 Running head: All are classified by how they fit into their respective industry based on individual factors that determine buyer and seller interaction, how prices vary, and how the various levels of production and selling processes mesh.
Essentially, when looking at market structure, the overall goal is to define and predict consumer behavior knowing that market structure is fluid with the understanding that what a market looks like today may be different from what it looks like in the future.
Based on the market structure, it is important for companies to adjust their pricing strategies accordingly. This paper looks at four different market structures and the associated pricing strategies. Market Structure 3 Running head: An industry is classified into one of four general market structures based on this.
The four general market structures are perfect competition, monopolistic competition, oligopoly, and monopoly. The price is dictated by supply and demand. An industry with perfect competition generally meets the following conditions: There are no entry or exit barriers to the market in question.
Additionally, customers are aware of the particulars of the product being sold and the prices that each company is charging for it, 4. An example of an industry that has perfect competition is farming.
Farmers grow their crops and sell them at a fixed price. If one farmer decides to increase his price, one simply buys the same type of crop from another farmer.
This prevents one farmer from increasing prices when all the other farmers are selling that same crop at a fixed price.
Market Structure 4 Running head: This market structure also has many different buyers. Both the buyers and sellers trade over a range of prices instead of a single market price. The products are not exactly the same hence the different prices.
As such, buyers purchase products based on individual preferences rather than the price. For an industry to have monopolistic competition, the companies in question produce products that are similar but are not so similar that they are considered substitute products.
Additionally, the companies are able to enter the industry even if the profits are attractive.
Furthermore, the all the companies in the industry are profit maximizers meaning that they will be able to determine a price and output level that gets them the most profit.
Finally, because all companies have some market power, none of them can be price takers. An example of an industry that has monopolistic competition is the beer industry.
Anyone can obtain the permits and resources to start a brewery and brew beer. Whether the beer brewed is successful is dependent on whether or not the customers like how the beer tastes compared to how other beer tastes.
A perfect example of this is the supermarket industry. First of all, it is a very difficult industry to enter into. If you notice, Market Structure 5 Running head: Market Structure Differences supermarkets advertisements are very similar in what they sell with regard to both product and price on a weekly basis.
Due to having sole control of an industry, the company controls the output of the product produced and can, on a whim, increase prices and increase their profits if they see fit. One the most famous monopolies in US history was John D.How Market Structures Determine Pricing And Output Decisions of Businesses Introduction To the extent a given market structure defines the agility and responsiveness of suppliers to demand, is the extent to which a .
How Market Structures Determine Pricing And Output Decisions of Businesses Introduction To the extent a given market structure defines the agility and responsiveness of suppliers to demand, is the extent to which a market enables greater levels of pricing elasticity.
A market structure where there are different sellers of the same product then the firm’s price determination and the output decision depends upon the demand for their products.
In a competitive market buyers actually determine the price and firm take the output decisions as compare to the demand for the product because every firm tries to.
Explain how market structures determine the pricing and output decisions of businesses. Illustrate the way in which market forces shape organisational responses using a range of examples.
Judge how the business and cultural environments shape the behaviour of a selected organisation. Explain how market structures determine the pricing and output decisions of businesses Market structure Market structure is defined by economists as the characteristics of the market.
It can be organizational characteristics or competitive characteristics or any other features that can best describe a %(10). Pricing discusses the rationale and assumptions behind pricing decisions. It analyzes unique market needs and discusses how business managers reach upon final pricing decisions.
It explains the equilibrium of a firm and is the interaction of the demand faced by the firm and its supply curve.