Competition and markets Essay Example | Topics and Well Written Essays - 750 words

Competition and foodstuffs - Essay ExampleFactors determining the elasticity of demand are food market demand elasticity, the number of businesses in the market in addition, the unfalterings interaction in the market. In monopolistic situation, the demand curve is always downward sloping and the industry demand curve is the firms demand curve. The marginal tax of a monopolistic firm is always below its legal injury and the marginal receipts usually changes with the changes in output but not equal to footing. The marginal revenue decreases with increase in output since the monopolist can only sell more units by trim back prices. Average Revenue curve is the demand curve and the average revenue is similar to price, however, Marginal revenue must always be less than the Average Revenue even as output increases with lineage in prices (Mankiw 2011). Firms in competitive markets sell absolutely similar or homogenous products and are referred to as price takers. Perfectly competiti ve market comprises of many suppliers who cannot single handedly influence either the market price and the total market output hence each supplier can only arrest a small part of the total market demand. The suppliers output is greatly controlled by the market forces and the price in which the suppliers must sell their products is at prevailing equilibrium price much(prenominal) that any increase in prices whitethorn invite another supplier who may be willing and able to supply at the equilibrium price. The inability of producing more goods than the market demand and the incapability of raising prices results into a horizontal or perfectly elastic demand curve. As much as a supplier may be able to reduce products prices, it may result into a loss hence the gather up to embark on the market price (Mankiw 2011). 2. There are various characteristics associated with the perfectly competitive markets such as the large number of firms in the market, assumption of non-existence of exter nalities, minimal government regulation, homogeneity in the units of input, payoff of homogenous goods, non-existence of barriers to entry, and the availability of perfect knowledge. In perfect competition, different firms produce goods that are perfect relief and whose prices cannot be easily changed by a single firm. Automobile may be produced under the market conditions similar to perfectly competitive market because of the fact that motor vehicles manufactured have very dummy up substitutes. In addition, there is no barrier to entry and the suppliers cannot increase the vehicle prices abnormally. In case an simple machine company reduces prices of its products, they may run at a loss. Moreover, the automobile firms can only manage and control a few customers in the larger market making it hard for them to determine the quantity of the automobiles to be manufactured and their prices (Mankiw 2011). Beer production also fits perfect competition conditions since beer product pro duced by one firm may as well be produced by another firm with may be very flimsy content changes. The fact that beer is manufactured by using almost similar product makes it challenging to fork the beer products. Furthermore, as a characteristic of perfect competition, there are many beer consumers as well as numerous beer manufactures. The beer consumers are always very loyal but highly sensitive to price changes thereof any slight change in price upwards, may hinder the consumers from using one particular product. In