There are four main market buildings in an industry, specifically, perfect competition, monopoly, oligopoly, and monopolistic competition. A perfect competition is market structure that occurs when there are many small business organizations that take part in a competition with one another. Upon this basis, your choice of one owner will not create any impact on the price tag on the products under consideration (Parkin, 2012). It's important to denote that under the forex market structure, the merchandise of the firms are standardized and they are identical.
These small company organizations do not have any impact on the price of their products. It's the market that can determine the prices with their products, through the laws and regulations of resource and demand. The forex market is also characterized by an lack of barriers that prevent new companies from departing or entering the market. A good example of a business that performs under a perfect market composition is the agriculture industry (Schwartz, Carew and Maksimenko, 2010). Inside the agriculture industry, there are a number of businesses that seek to sale agricultural produce to consumers. The costs of agricultural products are always led by the laws of demand and offer, and no individual entrepreneur can influence the prices of agricultural products.
However, it is important to denote that a perfect competition is a theoretical type of market composition, and it hardly ever exists in the real life. This is because companies always advertise their services for purposes of attaining a market talk about, and reduce the prices of these products for purposes of increasing their sales. Companies will make an effort to control the prices of the products, to be able to achieve success (Parkin, 2012). The perfect market structure can be an opposite of a monopoly. Under monopoly, there is merely an individual company that delivers a certain service or good. The business under consideration will usually control the prices of its products because competition does not exist. In a very monopoly, the merchandise that is produced is unique, and hence there is no substitute for the merchandise.
A monopolistic market is highly regulated, whereby new entries are obstructed which is also difficult to move out of this market. The reason why as to the reasons there is a restriction in this market is as a result of high costs of working the business in mind. Political, economic and social factors can also be the reason as to why new players might be hesitant to purchase the forex market (Schwartz, Carew and Maksimenko, 2010). For instance, the federal government can opt to form a monopoly in an industry which it wants to control. A good example is the electricity and the petrol industry.
Another barrier may occur a company has an exclusive right on the production of a natural resource. A good example is the engine oil industry in Saudi-Arabia where the Saudi Administration has exclusive control over the essential oil resources in the country. A monopoly will also are present when a business has a patent or copyright, which will prevent other players from getting into the market. A good example is Pfizer, which got a patent right above the production and distribution of Viagra (Parkin, 2012). An oligopoly on the other side is market structure whereby there are just a few companies that are in charge of producing and delivering goods and services.
These groups of companies have a control of the various prices of their products. It is similar to a monopoly in the sense that it has a high barrier of admittance. This is because entering in this kind of a market requires high capital foundation, which is obviously difficult to raise (Schwartz, Carew and Maksimenko, 2010). Additionally it is a lot like companies functioning under a perfect competition in that the products of one firm, is nearly the same as the products of another company. That is in terms of quality, and their features. In around companies operating under an oligopoly have a control over their prices, they are simply always inter-dependent using one another.
This is basically because before formulating an insurance plan, these companies will have to review the reactions of the competitors in terms of the prices of their commodities, advertising and advertising strategies, etc. Types of companies that operate under this kind of market composition are the auto-mobile companies. These companies are few in character, and it always requires a huge capital platform for anybody to invest in an auto-mobile industry. The marketing policies of the companies are always inter-dependent with one another. For instance, Mercedes/Daimler is an extravagance brand whose main rival is BMW. The prices of Mercedes vehicles will be determined by the costs of BMW (Parkin, 2012).
This is basically because they are both competing for the same market, and they create a similar product. A good example of an oligopolic market composition is the duopoly. A duopoly is a market structure characterized by the life of two businesses/ market sectors. A duopoly can have the same impact as a monopoly if both organizations collude for purposes of managing the prices of these products. A good example of a duopoly is the get better at cards and visa (Schwartz, Carew and Maksimenko, 2010). Both of these companies have a significant control of the electric payment market. Other for example Apple and Amazon, for their significant dominance of the e-book market.
Finally, a monopolistic competition on the other hands is highly similar to a perfect competition. In this kind of market, there exist many companies each handling a small ratio of the marketplace share. That is similar to a perfect competition market which thrives on the option of many small companies, fighting for the same market (Parkin, 2012). However, the main difference between this type of market recover of your perfect competition market is these companies produce different products, and is characterized by different rates and advertising strategies. A monopolistic competition market thrives on variety. Example of companies working under this structure is the fast food restaurants. Restaurants create a variety of foods, with different costs strategies and brand names. Also, they are located in various areas, which satisfies the characteristics of your monopolistic competition. s
Parkin, M. (2012). Economics (10th ed. ). Boston: Addison-Wesley.
Schwartz, R. A. , Carew, M. G. , & Maksimenko, T. (2010). Micro markets a market composition approach to microeconomic evaluation. Hoboken, N. J. : John Wiley & Sons.