Monopolistic Competition Explained

Monopolistic Competition ExplainedThere argon 4 main grocery social organisations in an fabrication, namely, utter(a) rival, monopoly, oligopoly, and monopolistic tilt. A perfect competition is a commercialise structure that occurs when at that place are m whatsoever small commercial enterprise organizations that engage in a competition with angiotensin-converting enzyme another. On this basis, the decision of ane seller does not create any impact on the legal injury of the products under consideration (Parkin, 2012). It is important to touch on that under this trade structure, the products of the companies are standardized and they are identical.These small business organizations do not train any influence on the price of their products. It is the market that determines the prices of their products, through the laws of supply and demand. This market is also characterized by an absence seizure of barriers that prevent untested-made companies from leaving or enterin g the market. An model of an patience that operates under a perfect market structure is the agriculture industry (Schwartz, Carew and Maksimenko, 2010). In the agriculture industry, thither are a variety of firms that search to sale agricultural produce to consumers. The prices of agricultural products are always direct by the laws of demand and supply, and no individual business person rear end influence the prices of agricultural products.However, it is important to denote that a perfect competition is a theoretical lawsuit of market structure, and it rarely exists in the received life. This is because companies always advertise their dishs for purposes of gaining a market share, and reduce the prices of their products for purposes of change magnitude their sales. Companies will strive to prevail the prices of their products, in order to achieve positiveness (Parkin, 2012). The perfect market structure is an opposite of a monopoly. Under monopoly, on that point is only a single company that provides a certain service or good. The company under consideration will always control the prices of its products because competition does not exist. In a monopoly, the product that is produced is unique, and hence there is no substitute for the products.A monopolistic market is highly regulated, whereby new entries are blocked and it is also difficult to move out of this market. The crusade as to why there is a restriction in this market is because of the high costs of operating the business under consideration. Political, economic and well-disposed factors can also be the reason as to why new players skill be reluctant to invest in this market (Schwartz, Carew and Maksimenko, 2010). For example, the authorities can decide to form a monopoly in an industry that it wants to control. A good example is the electricity and the oil industry.Another barrier might occur a company has an exclusive right over the doing of a natural resource. An example is the oi l industry in Saudi-Arabian-Arabia where the Saudi Government has exclusive control over the oil resources in the country. A monopoly will also exist when an organization has a patent or copyright, which in turn will prevent other players from entering the market. An example is Pfizer, which had a patent right over the production and distribution of sildenafil citrate (Parkin, 2012). An oligopoly on the other hand is a market structure whereby there are only a few companies that are responsible for producing and provide goods and services.These groups of companies have a control of the various prices of their products. It is homogeneous to a monopoly in the sense that it has a high barrier of entry. This is because entering in this theatrical role of a market requires high capital base, which is always difficult to climb (Schwartz, Carew and Maksimenko, 2010). It is also identical to companies operating under a perfect competition in that the products of one firm, is very simi lar to the products of another firm. This is in harm of quality, and their features. In as much as companies operating under an oligopoly have a control over their prices, they are always inter-dependent on one another.This is because before formulating a policy, these companies will have to analyze the reactions of their contests in foothold of the prices of their commodities, advertising and selling strategies, etc. Examples of companies that operate under this type of market structure are the auto-mobile companies. These companies are few in nature, and it always requires a huge capital base for anybody to invest in an auto-mobile industry. The marketing policies of these companies are always inter-dependent with one another. For example, Mercedes/Daimler is a luxury brand whose main competitor is BMW. The prices of Mercedes vehicles will always be determined by the prices of BMW (Parkin, 2012).This is because they are both competing for the same market, and they produce a sim ilar product. An example of an oligopolic market structure is the duopoly. A duopoly is a market structure characterized by the existence of twain firms/ industries. A duopoly can have the same impact as a monopoly if the two organizations collude for purposes of controlling the prices of their products. An example of a duopoly is the master humour and visa (Schwartz, Carew and Maksimenko, 2010). These two companies have a significant control of the electronic payment market. Other examples include Apple and Amazon, because of their significant dominance of the e-book market.Finally, a monopolistic competition on the other hand is highly similar to a perfect competition. In this type of market, there exist some(prenominal) companies each controlling a small percentage of the market share. This is similar to a perfect competition market which thrives on the availability of some small companies, competing for the same market (Parkin, 2012). However, the main difference between thi s type of market with that of a perfect competition market is that these companies produce distinct products, and is characterized by different pricing and advertisements strategies. A monopolistic competition market thrives on variety. Example of companies operating under this structure is the fast food for thought restaurants. Restaurants produce a variety of foods, with different pricing strategies and brand names. They are also located in different areas, and this satisfies the characteristics of a monopolistic competition. sBibliographyParkin, M. (2012). Economics (10th ed.). Boston Addison-Wesley.Schwartz, R. A., Carew, M. G., Maksimenko, T. (2010). Micro markets a market structure sexual climax to microeconomic analysis. Hoboken, N.J. John Wiley Sons.