The term market refers to the place where buyers and sellers meet to engage in transactions that entail the exchange of goods or the provision of services for a consideration. A market is not only characterized by a building where people carry out business transactions. This is because any place that people carry out commerce can be referred to as a market. A market is characterized by various mechanisms that facilitate trade. These mechanisms usually pertain to the supply and demand of products and services (Bergin, 2005). From this explanation it should be clear that a market is comprised of three main elements. The sellers these are the people who bring the products or services to the market to be procured by the willing buyers. At this stage it is imperative to highlight that in most cases sellers are the produces however in other instances the sellers are not necessarily the producers instead they can be traders. The second element of the market is the buyers. Buyers are individual who are willing and able to acquire the products or services being offered at the prevailing market price. Buyers are of two types; there are those that buy the products or services for their own consumption and there are those that buy the products or services in order to resell them in different markets. The buyers who buy the products for their own consumption are referred to as consumers whereas buyers who buy the products or services in order to resell them in different market are commonly referred to as trades and they can also be called arbitragers (Nicholson & Snyder, 2008). The third element of the market is the products that are being traded. The term product can be used to refer to either goods or services that are being offered in exchange for a consideration. The term product can also be used to refer to commodities only.
One of the general objectives of this paper is to facilitate the readers of this document to gain an understanding of how markets work and most importantly how a monopolistic competitive market works. This paper will achieve this through briefly discussing various types of markets and their characteristics.
Another general objective of this paper is to compare and contrast the various characteristics of the different forms of market structures. This will serve to enable the readers to carry out a comparative analysis of the various forms of market structures thus they will be able to enhance their knowledge on market structures. This objective will be attained through the analysis of the factors, which are mainly in play for the existence of a particular form of market. The paper will also seek to analyze how the various factors in such markets interrelate in order to develop a market mechanism for that form of market structure. This is because all forms of markets structures have market mechanisms. These market mechanisms are usually as result of the interaction of various factors that are both internal and external to a particular market.
One of the specific objectives of this paper is to discuss the conceptual theory of a monopolistic competitive market. The discussion of the monopolistic competitive market entails analyzing the various factors that characterize this particular form of market structure. This is will be important form enhance the knowledge of the readers of this paper, on monopolistic competitive market structure. The discussion of the conceptual theory will also enable the readers to have a good basis for analyzing and responding to questions that relate to monopolistic competitive market structure.
Another objective is to discuss the characteristics of a monopolistic competitive market. The discussion of the characteristics of a monopolistic competitive market structure is important because it will serve to explain how the various factors involved in this type of market structure...