Market structure Essay Example | Topics and Well Written Essays - 2250 words

Market structure - Essay Example Market structure is also affected by the decision of the individual firms in setting up prices within the industry & the supply of different commodities in the market. For example, when competition is high, firms tend to supply more & more in order to capture handsome market share. Barrier to entry is also an important factor to determine market structure. In a monopoly market structure, the degree of barriers to entry is much higher than in a perfectly competitive market, where the factor may have a zero percent influence. Another factor of consideration to understand market structure is market efficiency. A firm will operate more efficiently in a competitive market with a fear of losing opportunity rather than a firm operating in a monopolistic market (Cohen, 2010, pp.131 –133). Customer turnover ratio i.e. the no. of customer willing to change their consumer preferences due to change in market structure, over a period of time. This factor is an indicator of brand loyalty & reaction of marketing activities such as advertisements etc. A perfectly competitive market indicates a market condition where a large no. of buyers & sellers has the market power to set the price of homogeneous goods & services. In a perfectly competitive market, the no. of buyers & sellers are so numerous & well structured that the market price of commodities are beyond control of the individual buyers & sellers and all the monopolistic powers are eliminated from the market (Wong, 2010, pp.1174–1177). All firms are price taker, having a relatively small market share, operating on a profit maximization objective. The firms sell identical, homogeneous goods, having perfect knowledge about product quality, price & cost. In a perfectly competitive market, all firms are price taker. Seller must take the existing market price. If a single firm is charging a price above the market price, this will result in a loss of potential