Business Environment

Topics: Monopoly, Competition, Perfect competition Pages: 7 (1776 words) Published: September 15, 2014
DEFINITION
Market is a place where buyers and sellers meet and exchange goods or services. As there are lot many factors deciding on the market structure there are lot many variations as well determine the particular market structure in the economy. Task 1 : You are required to identify different types of market structure , and explain how market structure determine the pricing and output decision of business : There are many types of markets:

* Perfect competition
* Monopolistic competition
* Oligopoly
* Monopoly
* Duopoly
Perfect competition
Perfect competition can be described as competitive depends in part on how many suppliers are seeking the demand of consumers and with a new businesses can enter and exit a particular market in the long run. In a market economy, competition occurs between large numbers of buyers and sellers who vie for the opportunity to buy or sell goods and services. Perfect competition exists when there are so many people in the market, and other conditions are such, that no-one can influence the price, all other things being equal. Monopolistic competition is when a large number of firms sell closely related but not homogenous products. There are three ways: * There are many buyers and sellers

* Entry and exit are easy
* Firms take other firms price as given
Oligopoly is when there are a few large suppliers, and business decisions affect each other. Monopoly is a business environment in which a single company, by controlling a specific supply of products or service, set prices, prevents other business from entering the market and controls the available supply of the product or service. Duopoly is a market with tow sellers competing with each other with a homogenous good. The importance of market structure in an economy cannot be over emphasized as the effect of market structure on an economy, need to understand the value of this concept while dealing with others (buyers/sellers) in any market place. How market structure determine the pricing and output decision of business Taking pricing decision is one of the critical factors of business. to take the pricing decision a proper research needs to be carried out such as on the product availability, competitor's pricing strategy, customer's perceived pricing, customers willingness to pay the price of the product, demand factor etc. The pricing decision influences the demand of the product in the market, the pricing strategy of the competitors, the profitabilty of the company and the most important is the customer decision on purchasing the product such as which barnd product to but and which not, which will give the major satisfaction to the customer by rendering the higher value at the lesser price then the competitors The type of market structure a firm faces has some impact on its pricing, firms are never simply free to set their own prices if they want to make the maximum possible profit. In perfect competition, firms have no choice but to charge the market price. They are price takers in this market structure and must charge the same as everyone else. In all other market structures, firms have some control over their pricing. In oligopolies, they must pay attention to the pricing decisions of competitors, but they do not really need to do this in monopoly or monopolistic competition. However, in all of these cases, firms must (to maximize profit or minimize loss) produce the quantity were their marginal revenues equal their marginal costs. They must then charge a market clearing price--the price that will clear exactly that quantity of their product. Market structure does affect firms' pricing decisions, but firms are never simply free to set their own prices if they want to maximize profits


Task 2: Illustrate the way in which market force shape orgnization response using a range of example Market forces shape organizational responses through a very basic economic principle: Supply and demand. A...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • the business environment Essay
  • business environment Essay
  • business Essay
  • Business Environment Essay
  • Business and management unit1.1 IB Essay
  • Business Environment Essay
  • Business Environment of Unilever Essay
  • Business Environment Assignment Essay

Become a StudyMode Member

Sign Up - It's Free