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How Market Structures Determine the Pricing and Output of Businesses

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How Market Structures Determine the Pricing and Output of Businesses

Introduction
There are several different market structures in which organisations can operate. The type of structure will influence a company’s behaviour and the level of profits it can generate. The structure of a market refers to the number of businesses in a market, their market shares and other features which affect the level of competition in the market. Structures are classified in term of the presence or absence of competition. When there is no competition, the market is said to be concentrated. A scale from perfect competition to monopoly can be found below.

Perfect Competition
A perfectly competitive market is a market where competition is at its
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Elasticity varies among products because some products may be more essential to the consumer. Products that are necessities are more unaffected to price changes because consumers would continue buying these products despite price increases. On the other hand, a price increase of a good or service that is considered less of a necessity will discourage more consumers because the cost of buying the product will become too high. A product or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life. On the other hand, an inelastic good or service is one in which changes in price witness only modest changes in the quantity demanded or supplied, if any at all. These goods tend to be things that are more of a necessity to the consumer in his or her daily life.

Organisational Response to Market Forces
An organisation’s response to market forces is key in any circumstance as it will have a direct impact on the company’s profits and reputation. In terms of supply and demand the most successful companies will have appropriate market research and analysis in place to ensure that they are able to supply a product or service to meet the demands of its customers. If a company has judged the
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