Differentiating Bewteen Market Structures
Differentiating Between Market Structures
Mark Patterson
ECO/365 Principles of Microeconomics
April 21, 2013
Ashok Padhi
Differentiating Between Market Structures There are different classifications of markets and the structure of a business determines which classification it will fall into. Markets are divided according to the composition of the business and what it provides to the specific market. Business composition is determined by the structure of market characteristics, and this helps determine level and area of competition. The characteristics in a market with the most concentration focus on number of purchasers and retailers, level in which a product has a substitute, price, entry and exit ease, and the level of mutual dependence. These structured variables are classified in the following market structures: perfectly competitive markets, monopolistically competitive markets, monopolies, and oligopolies (Colander, 2010). Trader Joe’s is a grocery store that offers upscale grocery fare such as; organic produce, nutritional supplements, and health foods. Trader Joe’s was founded by Joe Coulombe and started in 1958 as a small chain of convenient stores in Greater Los Angeles Area called Pronto Markets. Since then, Trader Joe’s has expanded and now has around 375 stores in 30 or more states ("Trader Joe 's Company Competition, 2012). Trader Joe’s market may be viewed as a monopolistic competition, and falls into the grocery industry. A monopolistic market structure is characterized by many companies selling a distinct product in a market easy to enter. This market structure is similar to pure competition, except for the distinct product (Kowitt, 2010). These market structure classifications are based on the number of barriers and firms to access the market as outlined in Table one below. A perfectly competitive market exists when every contributor is considered a “price taker”, and none of the contributors influences the price of the
Mark Patterson
ECO/365 Principles of Microeconomics
April 21, 2013
Ashok Padhi
Differentiating Between Market Structures There are different classifications of markets and the structure of a business determines which classification it will fall into. Markets are divided according to the composition of the business and what it provides to the specific market. Business composition is determined by the structure of market characteristics, and this helps determine level and area of competition. The characteristics in a market with the most concentration focus on number of purchasers and retailers, level in which a product has a substitute, price, entry and exit ease, and the level of mutual dependence. These structured variables are classified in the following market structures: perfectly competitive markets, monopolistically competitive markets, monopolies, and oligopolies (Colander, 2010). Trader Joe’s is a grocery store that offers upscale grocery fare such as; organic produce, nutritional supplements, and health foods. Trader Joe’s was founded by Joe Coulombe and started in 1958 as a small chain of convenient stores in Greater Los Angeles Area called Pronto Markets. Since then, Trader Joe’s has expanded and now has around 375 stores in 30 or more states ("Trader Joe 's Company Competition, 2012). Trader Joe’s market may be viewed as a monopolistic competition, and falls into the grocery industry. A monopolistic market structure is characterized by many companies selling a distinct product in a market easy to enter. This market structure is similar to pure competition, except for the distinct product (Kowitt, 2010). These market structure classifications are based on the number of barriers and firms to access the market as outlined in Table one below. A perfectly competitive market exists when every contributor is considered a “price taker”, and none of the contributors influences the price of the
References: Colander, D. C. (2010). Economics (8th ed.). New York, NY: McGraw-Hill. Kowitt, B. (2010, August 23). Inside the secret world of Trader Joe 's - Full Version. Retrieved from http://money.cnn.com Mallinger, M., & Rossy, G. (2007). The Trader Joe 's Experience. Grazialdo Business Review, 10(2), 1. Retrieved from http://gbr.pepperdine.edu/2010/08/the-trader-joes-experience/ Trader Joe 's Company. (2012). Competition. Retrieved from http://www.hoovers.com/company- information/cs/competition.Trader_Joes_Company.cd133847612c3f8c.html