Recent industry analyses typically have strong relation with economic theories. There is a theory, belongs to microeconomics, divides industries into categories according t the degree of competition that exists between the firms within the industry, i.e.

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Business Economics

Market Structures

INTRODUCTION                                                                                                                                                                                                        

Recent industry analyses typically have strong relation with economic theories.  There is a theory, belongs to microeconomics, divides industries into categories according t the degree of competition that exists between the firms within the industry, i.e. the theory of Alternative Market Structures.  

This essay based on three questions divides into 3 parts to explain and evaluate the questions.

This essay (PART A) outlines the main categories of market structures, and shows the theoretical features of two of them, i.e. Perfect Competition and Oligopoly.

This essay (PART B) evaluates upon the most relevant structure in regard to the UK supermarket industry.

This essay (PART C) shows the implications for the UK supermarket industry of the Morrison to take over Safeway.

Additionally, in this essay, the spread conclusions of three parts are in their finalities that would be instead of the conclusion in the end of the whole essay.  

PART A

Markets can be described in relation to their different levels of competitiveness.   The different market structures are perfect competition, monopoly, oligopoly and monopolistic.  For an overview of each structure's comparative characteristics see Table 1

Table 1: Overview of the Four Market Structures

In this essay, it analyzes the two of them: Perfect Competition and Oligopoly.

Perfect Competition is the most competitive kind of market structure.  It is considered as an ideal form of economic organization for providing goods and services to consumers as efficiently as possible.  Its characteristics are classified as follows:

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  1. There are many firms in the industry, thus an individual firm's contribution to total industry supply is so small that whether a firm produces at full capacity or not at all, market price will not be significantly affected.

  1. There is a freedom of entry into and exit from the industry firms.  There are no significant financial, legal, technological or other barriers to new firms entering the industry or existing firms leaving it.

  1. All firms in the industry sell identical/homogenous product.  It makes perfect competition so extremely competitive and so rare.  The important thing is ...

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