A firm analyzed by principles of microeconomics - Research Paper Example

ixed and variable), the potential for technology to change cost, market failure , the government role on externalities and the existing government policies in connection to microeconomic theory. The Market Structure, Market Power, the Cost of Structure and Competition Wal-Mart Stores Inc. has an oligopoly market structure unlike other retailers all over the world that have monopolistic market structure. Nevertheless, the research shows that Wal-Mart Stores also has a monopolistic competition market structure due to the fact that the number of retailers that they have to deal with is too high.

It was first opened by Sam Walton in the year 1962 as a discount store. Being the largest chain store in the US, its success has been as a result of the ability of Sam Walton to establish a basic structure meant for their private business ecosystem thus changing the market structure over time. The business has 40-50 departments and the Store Manager is the top store position. Each store has many Assistance Managers who are also the first to be paid salaries in the organization (Bianco 63). Wal-Mart Stores is also divided in to 41 regions managed by regional Vice President, 6 of them being Sam’s Club regions.

Walton had a reasonable conclusion, the conclusion was that by offering many brands that are well known and selling the products at a lower price of about 15% as compared to other retailers, the business would be more powerful in the area of retailing. Wal-Mart made a wise decision of establishing more of its branches on the rural areas and in small towns instead of settling their business only in the large cities. This was mainly done to attract people from the suburbs where there was a lot of money unlike other large scale retailers who only concentrated in large towns.

The new system worked well for them since they were able to attract many people from the towns to their premises. In not more than three decades since the business was established, it had made a big step forward because it rose from a single and small discount store to become the largest retailer shop in the whole country of US (Bianco 63). Currently, Wal-Mart Stores runs the largest retailer shops in the whole world with over 2500 branches in US alone. One of the principles of microeconomics states that “Rational people think at the margin”.

According to the economists, people who are rational usually do their best to achieve their goals and objectives when they have the opportunity. Sam Walton borrowed this idea when he made a decision of lowering the price of the products sold by Wal-Mart Store so as to reach a wider market and serve many customers (Lichtenstein 98). Nature of the Demand, the Shape of Demand Curve and Consumer Setting Demand is the total amount of goods and services that a given consumer is able and willing to buy in a certain period of time at various prices.

The demand curve is the price-quantity relationship that is normally represented on a graph, the price being on the Y axis while quantity on the X axis. In terms of supply and demand curve, the demand for the goods provided by the Wal-Matt increases as the economy weakens. This is because the consumers continue to demand for goods that are cheap as the currency value weakens