Demand curve for oligopolistic market essay

Contact Us Select Page Explain the features of oligopoly market. Examine and illustrate why there is a kink in the demand curve in an oligopoly market? How does kink demand curve explain price rigidity in oligopoly? Each firm in an oligopoly market considers the expected reaction that other firms will have.

Demand curve for oligopolistic market essay

And this follows onto the theory of the kinked demand curve. This kinked demand curve shows that a rise or fall in marginal cost will not affect the profit maximising level of output or price.

This shows relative price stability in oligopolistic markets. This means that if one firm increases its price then the other firms will not react to it, the firm will loose a percentage of its market share.

This type of aggressive pricing can often lead to smaller firms going out of business as due to economies of scale they cannot afford to produce and sell at such a low price within their market.

Non-Price Competition Non-price competition focuses on other strategies for increasing market share. There are many ways of keeping Demand curve for oligopolistic market essay customers or to attract new customers. Other marketing strategies such as loyalty point card, special promotion and money off vouchers are also very effective.

Most customers prefer their items to be delivered rather than travel a distant to collect them. They may also wish to adjust their opening time to later hours so customers can collect their tools after the working hours. Most of the firms nowadays offer this type of services to attract news customers and prevent their customers going else where.

Possible reactions of Competition Commission for proposed take-over The overriding objectives of Competition law concern the efficiency between producers, suppliers and retailers, the protection of the consumer and small and medium sized firms as well as creating the integration of a single market.

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However, these objectives can be unattainable due to other policy objects such as the safeguarding of employment or regional or structural imbalances.

The policy of competition law intends to protect four issues, which occur within the free market of trade within and between Member States. The first is to prevent agreements with a restrictive nature being made between firms that do not have a beneficial effect.

The second is to control monopoly firms with market power from abusing their position and preventing competition entering the market as well as distorting the market itself.

Thirdly, a workable market needs to be watched and maintain in oligopolistic markets. Fourthly, the monitoring of mergers is required to prevent concentration of the market dominance and diminish competitive pressures within it.

EC policy is broad to allow the Commission to develop the principles. Other policies including economic, social and political can have an effect on competition.

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Different weighting is given to policies when deciding upon the facts before the courts. Competition law is based on assumptions of Perfect Competition which assumes that there is an unlimited amount of buyers and sellers, there is free entry and exit to the market, products are identical and homogeneous and there is full product information available to the consumer to be able to form a rational choice and decision on the purchase of products.

However, the conditions to aspire to Perfect Competition are not so easily achieved within the market itself, in fact virtually impossible as the market is not consistent or stable.

On the other hand, not having any competition regulations will leave the market open to domination by monopolistic firms. This enables the firm to control the output of products and fixing the price of products. The monopoly distorts the natural competition of the market.

Although the formation of a monopoly is economically harmful, it is acceptable to have a natural monopoly where the cost to produce two products is cheaper than one. The effects of competition comply with its objectives in producing greater efficiency, consumer welfare and protection of small and medium sized firms within the markets.

Efficiency is created when resources are supplied in accordance with demands, therefore an adequate number of products are produced without any over production thus reducing cost.

In being efficient the production costs are kept to a minimum in order to gain the efficiency and maximise profits. These profits allow investment in dynamic efficiency to improve the product through research and development.

Competition between firms allows the consumer to have several benefits as they have a wider choice of products, a better range of products due to innovation and lower prices. This permits the consumer to have a freedom of choice when selecting their product. Competition also enhances the freedom of firms to enter the market, compete with, and be protected from those already established.

The Competition Commission will make decisions on the competition questions and for making and implementing decisions on appropriate remedies. The Competition Commission can cancel the reference concerning the proposed acquisition.

Reasons of rising wages The labour market is very similar to the goods market in a perfect competition. People are the supply of labour and employers are the demand of labour.

Elasticity of demand for labour is relevant to the elasticity of demand in product. Just like the prefect competition, where higher wages have less demand than lower wages.

Firms demand labour not for its own sake but to bring in profit. Firms can increase profit by adjusting the quantity of labour and this brings into the law of diminishing returns. There are other factors that limit the supply of labour such as geographical local and the age group within the area.ECONOMIC ANALYSIS A firm under oligopoly faces a kinked demand curve (see figure 2).

The point of the kink is the point of the established market price. The kink of the demand curve suggests that a competitor would react asymmetrically to price increases and price decreases by the firm. Meaning: Oligopoly is a common economic system in today’s society - Oligopoly essay introduction.

The word “oligopoly” comes from the Greek “oligos” meaning “little or small” and “polein” meaning “to sell.” As a result, the demand curve facing an oligopolistic firm losses its determinateness.

Demand curve for oligopolistic market essay

The demand curve as is. Essay on the Kinked Demand Curve Solution in Oligopolistic Markets Article shared by Prices in oligopolistic markets are characterised by a remarkable degree of stability or rigidity particularly in their resistance to change in the downward direction.

Oligopoly Oligopoly is a market structure in which the number of sellers is small. Oligopoly requires strategic thinking, unlike perfect competition, monopoly, and monopolistic competition. • Under perfect competition, monopoly, and monopolistic competition, a seller faces a well defined demand curve for its output, and should choose the.

Buy Oligopoly Market Structure essay paper online Oligopoly is a market condition whereby the industry is dominated by small number of firms. The existence of a smaller number of firms generally leads to a low level of competition resulting in higher Monopolists are able to maximize their profits by selling a quantity of their good where marginal costs is equal to marginal revenue, but set a price where this equilibrium meets the demand curve.

However, a monopolist isn't desirable for consumers as they create a deadweight loss. (Shown below) The third type of market structure is an › Home › Free essays › Economics essays › A perfectly competitive market.

Essay on the Kinked Demand Curve Solution in Oligopolistic Markets