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Types of Market Structure in Economics
Market structure is understandable with its different types of market. In this blog we will discuss the types of market with case study or research of McDonalds and GlaxoSmithKline. Market structure is the essential of economy growth of any country or world. Below we can understand or know the concept and types of market structure in economics.
A) Perfect competition
The perfect competition has been observed for the business of Fast food industry, the relevant company to face the perfect competition from the competitors is McDonalds. The output decision of the McDonalds is based on the concept regarding the type of the production, amount of the production to earn the profit. It also focuses that if loss will incur how it can be balanced. The decision also is based on the fact of the perfect distinction between the short run operations and the long run operations. It also adds the opportunity cost to the total cost of the production. The perfect elastic demand curve is maintained as below:
Perfect Elastic Demand curve
McDonald use to compare the total revenue and the total cost schedule to find the level of the output notching with the profit expected. For the perfect competitive market, the margin revenue and the marginal cost use to remain equal. During the selection of the pricing, the shutdown point is important to consider by McDonalds’ where the firm should still produce. At this point the price is on the AVC curve. If the price will fall below the point, then the firm should shut down and should be paid its fixed costs.
GlaxoSmithKline can be recognized as the important company in the monopoly market of pharmaceutical. On the monopoly market, the company have the control on the setting of their prices as there is less number of the rivals or no rivals to beat their products circulation in the market. On the other hand, the production capacity in terms of the output decision is also determined by the company based on the market demand as the demand use to remain huge in the market. The price setting and the output setting is completely dependable on the expected and predictable profit that the organisation like GalzosmithKilne use to make.
In the oligopoly market, the market is dominant by the small number of the large forms those use to produce the identical or the similar like products. The market entry and the market exit is difficult in this market. The Unilever is one of the great examples in the oligopoly market. The pricing decision is strongly based on the analysis of the other competitors as very small amount of companies are existing in the market such as Procter and Gamble, and Colgate - Palmolive. At the same time, the quality of the output decision also is based on the market need and market responses. The stable pricing is focused by the organisation. In this case the Branding is another competitive advantage that uses to take place in the pricing strategy.
In the Duopoly market, only two large comptometers use to dominant the market. The Global aircraft market is important one in this aspect. Airbus and the Boeing are the important competitors in the market. The Dynamic pricing is considered here. The standard level of the pricing and the output decisions are taken based on the market trend and demand of the market so that the price elasticity can be maintained.