Importance Of Economic Market Structure

3664 Words Aug 4th, 2014 15 Pages
Importance of Economic Market Structures
Kevin Green
Economics 204 Principles of Microeconomics
Charles Fanning
8-3-14

Importance of Economic Market Structure In today’s economy, before an investor or any organization makes a strategic decision to begin production of a product, a market analysis is done to get vital information and to thoroughly understand the domestic or international demand, current suppliers, entry and exit barriers into a market, and the cost of producing a product or service. From gathering this information a firm can identify the market structure the product will enter, find out potential long-run profitability, survivability, incentives and cost efficiency. In this paper I will describe the characteristics of these four market structures: perfect competition, monopolistic competition, oligopoly, monopoly while providing an illustrative example of a couple. Also within this paper will describe the pressures with high entry barriers, preferred selling and buying markets, projected reaction to price changes for elastic and inelastic goods, government intervention and the expected effect of international trade on economic markets. The knowledge of knowing how a product or production firm fits into a particular economic market structure is important to investors because it influences a firm’s opportunities and business strategies for a successful venture. When an economic analyst is done correctly and successfully, it can identify the…
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