Essay about market structure

Essay about market structure.

Modern economics is based on market structures. When we talk about market structure we mean the way companies compete with each other in a particular market.

There are two market structures in the real economics - perfect competition and imperfect competition. Perfect competition describes a market structure where the companies have less control over price than the consumers. There must be a lot of small companies which provide perfect substitutes, have complete information and access to resources.  Also, there must not be any barriers to enter the market. It is hard to follow these conditions. That’s why we have the second type of market structure which is called imperfect competition. Imperfect competition describes a market stricter where a company is a price maker.

Talking about imperfect competition we should remind of monopoly. In a monopoly one company has a much larger market share than any other company. In fact, their share is so big that other companies cannot really compete. And the normal laws of supply and demand do not always work there. There are many aggressive ways to create a monopoly. One of these is by making takeovers. Takeovers happen vertically or horizontally. In a vertical takeover, a company buys companies that supply it with materials or services. In a horizontal takeover, a company buys its competitors. One final way a monopoly occurs is for the government to make it happen. This is called a legal monopoly, but not because other monopolies are illegal. It is called a legal monopoly because it is created by law.

Perfect competition lets laws of demand and supply work. In this market structure a company is a price taker and a consumer is a price maker. It is very comfortable for people, as they can make the consumer choice. However, not all of market structures are good for consumers. Monopoly is a price maker, so that the laws of demand and supply do not work there. It means that people lose their consumer choice.

Finally, we can say that there are two market structures in the real world. Perfect competition, which lets people make the consumer choice and lets the laws of demand and supply work. But it is hard to create it, as it needs many conditions. And Imperfect competition, which cannot always be good for consumers. Moreover, the laws of demand and supply cannot always work there.