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How the use of different theoretical perspectives can help us in understanding how markets function

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Introduction: The aim of this essay is to answer the 2 parts of the provided question. In the first part I will discuss the different markets models and how those different models describe the way markets function. While the second part will discuss how and why markets are limited and failure cases happens. An example case of a market failure is to be provided to assist this part of the discussion, and for this purpose I chose the affect of SARS in the airline and tourism markets as an example. How the use of different theoretical perspectives can help us in understanding how markets function Markets are a mechanism which allows people to trade normally, governed by the Law of Supply and Demand. Markets have different structures or models, all function under the view of competition. Competition in economic terms is understood to be the situation in market where the monopoly power is absent or very limited and no power is influencing product price or quality. Hence a competitive market is the one in which none of the participants possess market power. ...read more.


Externalities are another example of the weakness of thinking that prices can provide perfect information. Prices can not demonstrate the social costs and benefits from an economic activity. Monopolistic competition - Sens's model: Sens's model disagree totally with the neo-classical balance of supply and demand, he views competition as a power struggle markets characterized by conflict rather than by harmony or interests. The main features of this model are: - Emphasis on the unequal nature of the gains and losses of efficiency. - Firms and organizations are part of the struggle for economic power. - Markets do not ensure positive freedom. In general, Sen's argues that economic power is distributed unevenly and that this too is an aspect of competitive market relations. Conclusion: Though the four market models adopt the liberalism/ capitalism tradition of thought still there are differences between them in how each model view the type of competition in the market. However the boundaries between one type of market and another are blurred and a market can apply one or more of the models in it without being able to easily distinguish them. ...read more.


The first thing to discuss is how the outburst of the disease caused government and governmental institutions to issue new regulations for using organic and biological items, but for which price? From an economical point of view, the outburst of the disease caused the livestock market to drop down dramatically. Importing countries banned livestock imports from most of the European countries as well as USA - where the disease outburst - leading to major losses. Cattle were slaughtered in order to stop the disease, as well as recalling meat from the markets. Cattle prices dropped down demand on meat transferred from European and American to Asian countries, although the overall consumption of the beef market dropped down. Employment in this sector of industry was cut down as a lot of the specialized butchers did not find customers any more. Not only farms, livestock market and beef retailers got hurt; but also the fast food industry got harmed, MacDonals for example shifted to marketing non-beef products like Chicken Nuggets and Vegi Sandwiches. This is because of the general fear the spread among public, which shifted the taste to alternative items for meat. A social effect which continued to some extent even after the threat has almost disappeared. Word count: 1995 words in total. ?? ?? ?? ?? ...read more.

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