Market Structures Simulation

Every single household in the entire world purchases goods and services on a daily basis. Whether individuals purchase food, gas, household items, household utilities, travel tickets or any other goods or services, many people deem it beneficial to know the markets that they take part in as the consumer. In order to begin understanding the importance of market structures this paper will first define the term and concepts concerning market structures. Next, this paper will analyze a simulation given by the University of Phoenix as a learning tool to help understand market structures and lightly covering what the advantages and limitations of supply and demand identified in the simulation were. Then this paper will attempt to apply the concept
The four basic market structures in economics are perfect competition, monopoly, monopolistic competition and oligopoly. A market that is in the market of perfect competition, “is a market in which economic forces operate unimpeded” (Colander, 2004). A market that is considered a monopoly is “a market structure in which one firm makes up the entire market (Colander, 2004). A monopolistic competition is “a market structure in which there are many firms selling differentiated products” (Colander, 2004). Oligopoly is “a market structure in which there are only a few firms” (Colander, 2004). Having defined crucial terms concerning market structures, this paper will analyze the simulation provided by the University of
Being a monopoly, a business has no competition and may set the prices to maximize profits for the company. Businesses just starting out may encounter many barriers where competition is nonexistent and barriers to entry are big. With no competition, the product may suffer. Customers have no option but to buy or not buy the good or service provided. The equation of MC=MR is relevant to every market structure when attempting to maximize profits. The monopolistic company should determine whether to increase or reduce supply. Monopolistic businesses should charge what they think a customer will pay. A company within a monopolistic competition is up against many sellers and customers. With few barriers to entry, the company should vend goods or services that are unique of their competition. Accompanying a downward sloping curve of demand, the MR=MC line is alleviated with the demand curve. Here is where prices can be determined (at the intersection) to maximize profits. For an oligopoly, there are not many firms, but barriers to entry for new competition are big. Before determining any strategic options, the actions of the competition should be taken into consideration. By doing this a business within an oligopoly may maximize profits in the end if other businesses follow