Business environment - Coursework Example

Business Environment Market structure explains the strategies adopted by the firms in the market explainedby the different features. There are several market structures which are discussed below. A perfect competitive structure is one that there suppliers and purchasers are many in the market for the good. The decisions of an individual do not affect the market. The marketplace prices are dictated by the powers of demand and supply where the equilibrium price is agreed by the connection of demand curve and supply curve.

The price is set at MC = MR =P =AR=AD as below indicated. Features are, many buyers and sellers, free entry and exit, homogeneous products, factor mobility and perfect information (Adams &Periton, 2008). The advantages are effective allocation of resources, free information, consumer sovereignty and normal profits are made. However, the cons are lack of economies of scale, no market incentive, cut throat competition and no variety of goods offered. A monopolist is a structure that comprises of one seller but many buyers, therefore, sets the prices e.g. at P = AR (McConnell &Brue, 1995).

Features are one seller, many buyers, price setter, restrictions on entry, high sunk costs and enjoys economies of scale. A monopolists has the following pros, no wastage of resources, can venture in to research, and easy to adopt to new technology. The disadvantages are low quality service, no sovereignty of consumers and there is consumer exploitation due to high prices. The other structure is the monopolistic competition where there are many sellers who sell slightly different products. The price is set by the producer in the short run and not in the long run.

That is at P = MC as shown by the diagram above. The structure has features such as, independent decision making, imperfect information, an individual decision affects the market, free entry and exit and firms set prices The benefits include, no barriers to entry, wide variety of products available and relatively efficient than monopolist. The drawback is inefficiencies in allocation of resources. The last structure is the oligopoly structure where there are few suppliers who are large firms in the marketplace (Hall & Taylor, 1993).

The above diagram shows the kinked curve. The price is set where P =MC or at the kink of the demand curve. The decision of a single producer can affect the entire market, therefore, coalitions exist to set the price of the goods (McConnell &Brue, 1995). The features include few large firms many buyers, firms collude, high restrictive barriers to entry and dependence decisions. The advantages are makes huge profits, can lead to innovations and stable prices. The shortcoming include dependent decisions, high entry barriers and poor quality (Baligh &Richartz, 1967).

ReferencesAdams, S., & Periton, P. 2008. Fundamentals of Business Economics (3rd e.d.). Burlington: Elsevier Science & Technology.Baligh, H. H., & Richartz, L. E. 1967. Vertical market structures. Boston: Allyn and Bacon.Hall, R. E., & Taylor, J. B. 1993. Macroeconomics (4th e.d.). New York: W.W. Norton.McConnell, C. R., & Brue, S. L. 1996. Economics: principles, problems, and policies (13th e.d.). New York: McGraw-Hill.