Rise in Price of Tea Leads to an Increase in the Consumption of Coffee - Assignment Example

A bumper harvest of dates leads to a reduction in the price of dates and a rise in the supply of dates in the market.

PriceS0

D0S1

Q0Q1 Quantity

• Personal care during the wedding season (Beauty Salon Market)

Personal care during the wedding season will lead to an increase in demand of beauty care which in turn leads to an increase in the supply of beauty care products. This creates a new equilibrium price and quantity different from the original one.

Price

S0

S1

D1

D0

Q0 Q1 Quantity

Task Two

Price

0.500

Baisa

0.600

baisa

0.700

baisa

0.800

baisa

0.900

baisa

OMR

1.000

OMR

1.100

OMR

1.200

OMR

1.300

OMR

1.400

Quantity

Demanded

1000

900

800

700

600

500

400

300

200

100

Quantity

Supplied

400

500

600

700

800

900

1000

1100

1200

1300

• Plot the graph

• The market equilibrium price and quantity for apples is:

Equilibrium price- 0.8

Equilibrium Quantity- 700

• The situation at OMR 1.300 is that the market is above equilibrium. The market price is above the equilibrium price; therefore, the quantity of apples supplied to the market is more as compared to the quantity demanded. There is a surplus.
• The situation at OMR 0.600 baisa is that the market is below equilibrium. Hence, the market price is below the equilibrium price and the quantity of apples supplied to the market is less as compared to the quantity demanded. There is a shortage.

Task 3: Differentiate between different market forms studied by you. Mention any differences among them.

A market is a place where people meet with the aim of exchanging goods and services. Market structure is the number of firms with characteristics which are interconnected like homogenous products. The different forms of market include; oligopoly, perfect, monopoly and monopolistic markets and they exhibit similarities and differences.

Perfect market exhibits a market which has perfect competition. It has no control over the prices of goods and services. In this type of market structure, buyers and sellers who are known as price takers are not able to influence the prices due to the large number of buyers and sellers. The prices of goods and services are determined by the forces of demand and supply while the nature of their demand curve is perfectly inelastic. There are no barriers to entry and exit of firms in the market. Therefore, if the market is making a large amount of profits, many firms will prefer to enter the market. If the market is undergoing losses then firms will decide to leave the market which will reduce the number of firms in the market. The products sold under perfect competition are similar in that the consumer cannot differentiate which good is from which company. Therefore, there is no advertisement of goods in the market as the goods are not differentiated. Consumers and producers know the market very well which limits the chances of corn people as there is perfect knowledge about the rates of prices. Under perfect competition, there are no transportation costs as the firms are close to the market which does not call for transportation. In this type of market form, factors of production are mobile. They are allowed to move from one place to another especially with labor but with land, there is allowance of alternative uses. There is independence of decision making in that the buyers and the sellers are not influenced by any external forces during decision making.

Monopoly market has a single seller and many buyers. The firm in the market is able to maximize on profits as they are the only sellers in the market. They take the profits and partition them wisely on how they are going to spend it. There are very high barriers in this type of market because the seller does not want other firms to enter into the market and take the profits the firm has been getting. In monopoly market, there is no competition since the seller is alone in the market and there are no firms threatening to take the consumers from her. Monopoly market structure hinders good management in that the seller knows that there is no there firm in the market to compete with hence may end up making poor decisions which may result to huge losses. Prices in the market are determined by the seller as he is able to determine the rate at which he will price the services offered depending with the elasticity of the market. If the market is less elastic, there is an increase in prices and vice versa.

Monopolistic market structure is a combination of the features of perfect and monopoly market structure. This type of market structure has goods which are differentiated but related closely. It is where products are put together depending with size and brand. Here, products are almost the same but are not perfect substitutes of each other hence; consumers are willing to pay different prices for products which are almost the same. There are a large number of buyers and sellers in the market which leads to high competition. Every firm tries to differentiate its product in a way that consumers will prefer purchasing the product as compared to the product produced by another firm. It leads to good decision making and better management as the firms want to maintain their consumers.

Oligopoly market structure is a very different market structure which is different from the other three market forms. Here, firms tend to incur selling costs due to advertising and purchasing of goods. The firms in the market rival against each other in changing and maintaining market policies which favor them. The most important feature in oligopoly market structure is interdependence among firms. If a firm comes up with an idea of a certain good and introduces it to the market, when other firms notice that the new good is gaining popularity, they will try to emulate and start selling the new good. There is barrier of entry of firms into market in the long-run which is a characteristic which is not present in the short run. Enjoyment of economies of scale by existing firms and the existence of licenses and patents are among the many reasons which tend to create barriers of entry into the markets.