Coffe Bun Market in Malaysia

Topics: Marginal cost, Supply and demand, Costs Pages: 10 (3010 words) Published: October 31, 2010
1. Coffee bun market
Research and certified by economists and scholars, market structure has 4 types of market. It comprises of perfect, monopolistic, oligopoly and monopoly. Each market has its own characteristics and features which the businessman are required to master so that they are able to apply the business strategy sophisticatedly. First of all, it is perfect competition. In this market type, there are a lot of small firms and customers. Thus, both sides do not have any effect on price. Besides, the products sold in this market are identical to the sellers. And because product is homogenous and consumers do not care the brand name, it leads to a strong competition among the sellers to gain the most attention from consumers. Moreover, the entry of market is free. There is almost no object to prevent new firms from entering the market. So it is very easy for them to come in and compete with the existing firms. And if they feel the profits from the business not as much as they want, they also leave the market without prevention. One more thing is that the information about price and products in the market are observed and updated well by both sellers and buyers, so they know which suppliers are offering same products with lower price than another. For example, selling cabbage belongs to perfect competition where the sellers and buyers update their own information about price daily. And the buyer can choose any seller which they provide the lower price than another in the same market. The sellers can want not to sell the cabbage anymore if it is unprofitable (Sloman, 2003). Secondly, it is monopolistic market. Monopolistic market is described as imperfectly competitive market in which many firms are selling a homogenous product but different from other sellers. In monopolistic market, each firm is price maker for their own products, but the similar products must compete for the same customers. Thus, a downward-sloping demand curve is characteristic of monopolistic competitive market. Free entry and exit also appear in this market. There is no restriction for a newcomer to tap into the market because the firms do not have so much market power in terms of controlling supply of essential resource, financial requirement and so on. For example, the books in the shelves of the store are written by different authors. The types of books might be belonging to the romantics, love, and society and so on. The price is set up differently by the producers. This illustrates monopolistic competitive market. Thirdly, it is oligopoly, one type of imperfectly competitive markets. In this market, a few firms are existing and dominant. There is no specific number of firms that exist in the market. Instead, the firms are basically mutual interdependent. One action is changed by one firm will have impact on the other in the same market. For example, AztraZeneca wants to consider price change or new product; they need to consider what Pfizer is going to react to this action. Besides that, a few firms are selling homogenous or differentiated products. The medicine produced by Astrazeneca is similar to the medicine from Pfizer. Last but not least, firms existing in oligopoly are able to prevent new firms from entering the market. Interdependent firms will set up the barriers such as financial requirements, making a control over the resources, and economies of scale, where the big firms are able to use up their sources, produce more products leading to reduction in total cost (Baumol and Blinder, 2007). Lastly, it is monopoly. Monopoly is described as the market dominated by a sole seller sells a unique or differentiated product. The firm basically does not face any rival in the market. Price will be set up by the firm and follow a downward-sloping demand curve. Price will increase while the quantity supply increases. The firm is considered as price maker. The consumers have no choice to choose either this firm or another, because the firm...
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