Write an assignment on taking 5 businesses around you and bifurcate these under different forms of market in economics on the basis of characteristics. Also analyse how their market equilibrium will be different from each other
Sample Answer
Sample Answer
Title: Analysis of Local Businesses and Their Market Characteristics
Introduction:
In this assignment, we will examine five local businesses and categorize them into different forms of markets based on their characteristics. Furthermore, we will analyze how the market equilibrium of each business differs from one another. By understanding the distinct market structures, we can gain insights into the dynamics of these businesses and their impact on the local economy.
I. Perfect Competition:
Business A: Farmer’s Market
Characteristics:
Numerous buyers and sellers offering homogeneous products.
Ease of entry and exit into the market.
No individual seller has control over price.
Market Equilibrium:
In perfect competition, the market equilibrium is determined by the intersection of supply and demand. The price is set at the point where quantity demanded equals quantity supplied.
II. Monopoly:
Business B: Local Utility Company
Characteristics:
Single seller with complete control over the market.
High barriers to entry, limiting competition.
Unique product or service without close substitutes.
Market Equilibrium:
In a monopoly, the market equilibrium is determined solely by the monopolist’s decision-making. The monopolist sets the price and quantity of goods or services to maximize their own profits.
III. Oligopoly:
Business C: Local Telecommunications Providers
Characteristics:
Small number of large firms dominate the market.
High interdependence among firms, leading to strategic decision-making.
Products may be differentiated or homogeneous.
Market Equilibrium:
In an oligopoly, the market equilibrium is influenced by the strategic interactions among firms. Price and output decisions depend on factors such as pricing strategies, advertising, and product differentiation.
IV. Monopolistic Competition:
Business D: Local Coffee Shops
Characteristics:
Many sellers offering differentiated products.
Ease of entry and exit into the market.
Limited control over price due to product differentiation.
Market Equilibrium:
In monopolistic competition, the market equilibrium is determined by the interaction between demand and supply conditions for each individual firm. Price and quantity are set where marginal revenue equals marginal cost.
V. Duopoly:
Business E: Local Gas Stations
Characteristics:
Two dominant firms in the market.
Interdependent decision-making between the two firms.
Homogeneous product or slight product differentiation.
Market Equilibrium:
In a duopoly, the market equilibrium depends on the strategic interactions between the two firms. Price and quantity decisions are influenced by factors such as pricing agreements, market share, and competitive behavior.
Conclusion:
By examining these five local businesses through the lens of economic market structures, we have gained insights into their distinctive characteristics and how they impact market equilibrium. Perfect competition, monopoly, oligopoly, monopolistic competition, and duopoly all have their unique dynamics that shape pricing, output decisions, and market outcomes. Understanding these market structures helps us comprehend the complexities of local businesses and their contributions to the overall economy.
