There are four basic types of market structures. Recognizing and applying market structures to companies requires a solid understanding of theory and practice. The bachelor's degree in business administration and the online MBA from Aurora University help students develop the knowledge and skills needed to advance their careers. Students receive instruction on current business practices from faculty members with real-world experience.
Each program is conducted in a fully online learning environment. Based on the above characteristics, economists have used this information to describe four different types of market structures. From a society perspective, most monopolies are not desirable because they translate into lower production and higher prices compared to competitive markets. Pure or perfect competition is a market structure defined by a large number of competing small businesses.
The company, therefore, remains a single seller because it has the power to control the market and set the prices of its products. In economics, market structures can be well understood by closely examining a number of factors or characteristics exhibited by different actors. If a large group of sellers entered the market, this would increase the supply of available stock and likely lower prices. Supply and demand determine the quantity of goods and services produced, together with the market prices set by companies in the market.
Some of the factors that determine the structure of a market include the number of buyers and sellers, the ability to negotiate, the degree of concentration, the degree of differentiation of products, and the ease or difficulty of entering and leaving the market. There is a clear advantage for traders who identify a trend when entering the market when a trend begins to develop, meaning that they are more likely to produce a profitable outcome. The lowest possible cost of production, which leads to optimal production in a purely competitive market structure, is not assumed. And last but not least, a monopoly refers to a market structure in which a single company controls the entire market.
The fiscal and monetary policies that governments and their central banks implement have a profound effect on the financial market. Monopolistic competition refers to an imperfectly competitive market with the characteristics of a monopolistic and competitive market. In a variable market, the price moves within an upper limit or resistance level and a lower limit or support level. Oil supply and demand are constantly changing, adjusting the price a market participant is willing to pay for oil today and in the future.
Monopolistic competition also refers to a market structure, in which a large number of small businesses compete with each other.