A market refers to a group of buyers and sellers of a good or a service and the institution or arrangement by which they come together to trade. The interaction of supply and demand determines the quantities the suppliers are willing and able to produce, as well as the market price. According to the law of demand, people demand more (quantity demanded) when the price declines. Alternatively, if the price increases, the quantity demanded for the commodity decreases; however, the degree of change in quantity demanded depends on the level of the elasticity of demand that commodity has. If a given commodity is a necessity or if it has fewer or no substitutes, then a change in the price will not affect demand significantly. For example, we don’t respond the same way when the price of gasoline changes as we respond when the price of soft drinks changes. Gasoline is a necessity commodity, but soft drinks have many substitutes and are not a necessity.
Market structure is defined as the organizational and other characteristics of a market that affect the nature of competition and pricing. Suppliers in a monopoly market structure, such as natural gas suppliers for example, have no competition and they can set the price of their commodity however they want. For this reason, monopolies have high level of market power. On the other hand, suppliers in perfect competition market structure, such as corn growers, have many competitors and they sell identical commodities. As such, they are price takers and have no control over market price.
The general rule is the higher the level of market power a supplier has, the higher the level of control they have over prices and the higher the level of profitability they can achieve.Assignment Description
This assignment is intended to determine the efficiency and profitability of different organizational arrangements. An organization could be a small business (a restaurant, a hairdresser, a singer, an artist, a gift shop, a street vender, etc.), a large private organization (a manufacturer, a university, a hospital, a charity, a distributor, a transportation provider, a bank, etc.), or a governmental agency (a public school, city services, a correction facility, a tollway, a park district, a postal service, a public transportation, etc.). You could choose to discuss the market structure in which a specific organization is operating in, or you could choose to discuss the advantages, disadvantages, and differences between larger structures such as private versus public ownership, capitalism versus socialism, and corporate ownership versus small private ownerships.
To start, select an organization (a private small business, a corporation, a charity, or a government agency) that you wish to analyze for this assignment.