The Grapes of Wrath by John Steinbeck - Research Paper Example

? Market Structures The following paper explains different market structures extracted from the book ‘The Grapes of Wrath’ by John Steinbeck. The main characters in the book are farmers and the era where the story is set is that of the Great Depression. Like numerous other farmers and small business owners, the individuals depicted in the story try to sell their produce. They enter into economic transactions at several instances. The examples of the market structures from the story would be pointed out and explained comprehensively. Following are the five market structures with the explanation of the scenario in which they are described in the book. Pure Competition A market structure is known as ‘pure competition’ when there are a large number of sellers or firms in the market. Due to the presence of a large number of sellers in the market, there is no possibility of the presence of monopoly, oligopoly or difference in prices. The competition brings the prices of products to a point that is determined natural by the market forces i.e. the demand and the supply. The example of pure competition in the book is given when the author describes the hamburger stands and restaurants that are located at the Route 66. The number of business operating in that one market is very large and the products provided by those businesses are almost the same. The example in the story suggests that there are a large number of small businesses that offer quick meals, candy, medications, gasoline and other essential commodities. In the presence of a large number of sellers and substitute products, the buyers are given with a complete freedom to choose any feasible seller. In such a scenario, the sellers cannot keep prices any higher than those prevailing in the market. The impact of such a market structure on the sellers is not so beneficial as they are not allowed to keep a high profit margin and the profit they make is normal profit that is determined by the market forces. However, buyers on the other hand, are benefitted by such a market structure as they do not have to pay any higher than the normal price. In some circumstances, when there is excess supply in a perfect competition, the prices may lower even further due to the laissez faire market forces. Monopolistic Competition Monopolistic competition is a market structure that is the opposite of the perfect competition. Unlike perfect competition, in monopolistic competition, the products are differentiated and there are less or no substitute products in the market and the number of firms is also low. This scenario benefits the sellers as they are free to charge any price for any buyer. From the story line, the example of monopolistic competition can be extracted from Chapter 26 when one of the characters goes to market in order to buy some groceries. It is found out that all the prices, even those of the basic necessities, are inflated and there is nothing the buyer can do against it. This scenario rises because there is product differentiation and price differentiation in the market. The character, Ma, is surprised at each price she is told for the products she wishes to purchase. She even reminds the shopkeeper that not long ago the prices were significantly less than what he quotes and the shops in the town offer lower prices. Other sellers are present in the market that has been indicated as ‘town’ in the book, but the monopolistic competition in intact due to the geographic location and price differentiation. Therefore there are no substitute products in the market. The sellers are free to charge any price at any profit margin and the buyers would have no influence over the prices and they would be compelled to buy at the inflated prices. Thus, in a monopolistic competition, the number of sellers in the market does not impact the overall competition due to lack of substitute products. The sellers are benefitted from this situation because they are free to charge high prices while the buyers are exploited and they are forced to pay unnaturally high prices (Samuelson, 2005). Oligopoly Oligopoly is a market structure in which the number of sellers is very low. Due to the low number of sellers, the competition is also low in the market and the buyers are often exploited as in the monopolistic competition. In the book, the example of oligopoly can be that of the banks described in the books. There are a numerous people who are going through a severe financial crisis and they borrow money from the banks against their lands. The number of banks is low and the number of people who need to borrow money is really high. In such a situation, the banks become free to offer the money at the most unlikely of terms and conditions. At one point, the banks have been described as the land companies in the book as they keep forcing people off their lands in order to take possession. In the story, banks have been described as ruthless institutes that are run by men but they perform all the acts that are hated by men. Banks have been described as the institutes that care about nothing but the profits. According to the author, just like men breathe air, banks breathe profits and if they don’t make any profits, they’ll die. A number of people have to let go of their homes because of the land mortgage. In an oligopoly, the sellers are aware of each other’s policies therefore they design their policies in such a manner that they are not impacted by the little competition in the market. The tool used for this purpose is product differentiation. They enjoy significant market share and high profits. The sellers often enter into agreements to not drop the prices in order to collectively benefit from the situation. Thus the sellers in an oligopoly are benefitted but the buyers are exploited. The buyers are compelled to deal with the only sellers in the market. Monopoly Monopoly is a market structure where there is only one seller in the whole market and the buyers are compelled to deal with the one seller in order to buy the products. In such a scenario, prices are set by the seller and the buyers have no influence over the prices. In case of labor, wages may be unnaturally low and the workers would have no influence over the wages for they are compelled to earn. In the book, the example that can be attributed to this market structure is that of fruit picking. In one instance from the story, there is an employment opportunity at an orchard for picking ripe peaches. Even thought the peaches are less in quantity, the number of effective labor that is willing to do the work is really high. This creates a situation of monopoly. There is no other opportunity for work in the market and the person who requires services of the labor is benefitted by paying a very nominal amount to his workers. There are thousands of men and women who are ready to pick the peaches therefore the owner pays them very less regardless of the quantity of fruit picked by them. Driven by the weak financial conditions, the workers have no control over their wages and they are compelled to accept what they are given. In a monopoly, the factors like price and as in the scenario given in the book, wage are determined by the seller due to the lack of sellers and substitute products in the market (Arnold, 2008). The situation enables the seller to determine any price at any rate of profit and the seller is not affected by any market forces because the buyers are compelled to buy the product due to lack of substitutes. From the buyers’ perspective, monopoly is not favorable in any case as they are compelled to pay inflated prices and in case of labor they are paid less wages than the normal rate. Monopsony Monopsony is a market structure similar to monopoly except the fact that the position of buyers and sellers is opposite in this situation. In monopsony, there are a large number of sellers but very less number of buyers therefore it is the buyer who dictates the terms and conditions of the agreement. In the story line, the farmers are hit by the Great Depression and not many people are capable of buying their produce. There is excess of agricultural products but there are no buyers in the market. The farmers are desperate to sell their products therefore they are compelled to sell them at very low prices at the terms that are set by the buyers. Similar to the situation of monopoly, the market forces do not influence the determination of price in the market. The authority to dictate the price is in the hands of the buyer. Even though the sellers are at liberty to turn down any offer but they are compelled to sell because they need money and there are no buyers in the market. Thus, in a monopsony, buyers are benefitted by the situation while the sellers have to suffer loss. The buyers purchase the products at unnaturally low prices giving sellers no room for profit and in the most instances, seller are compelled to suffer loss. The sellers cannot keep the inventory with them for too long for the reasons of obsolescence therefore they are compelled to sell at low prices. In a graphical example, when the supply increases and the demand is less, the natural price drops at a significantly lower point. However, the buyers dictate the price and drive it at a point that is even lower than the price determined by market forces. Works Cited Steinback, John. The Grapes of Wrath. Penguin Books, 2006. Print. Arnold, Roger A. Economics. 9th Edition. Cengage Learning, 2008. Print. Samuelson. Economics. McGraw-Hill Education, 2005. Print. Read More