Differentiating Between Market Structures free essay sample

Differentiating Between Market Structures Alana Campbell, Dale Fortune, Katrina Beyah, Leonard Cooper University of Phoenix ECO/212 Principles of Economics Donnetta McAdoo December 5, 2011 Differentiating Between Market Structures To understand the economy of today one must understand the different market structures that make up the economy. There are four market structures that define the economic structure within the world’s economy; perfect competition, monopoly, monopolistic competition, and oligopoly. Team A will provide example of each market structure by completing a market structure table. The members of Team A will also compare and contrast the differences between public goods, private goods, common resources, and natural monopolies. Another portion of the paper will discuss how supply of labor and demand of labor affect labor equilibrium within the market. Team A selected Wal-Mart as the familiar organizational market structure to review, identify, and evaluate. Team A will also provide the factors that affect Wal-Mart’s labor supply and demand. Compare and Contrast To compare and contrast both public and private goods used within the Wal-Mart Corporation, differentiations help identify structures by which the company competes and profits. A public good is both non-rivalrous and non-excludable. Public goods are often although not always, supplied by a government rather than by private firms (p. 148). Classic examples of public goods include national defense and court systems. Conversely, goods both rival (competitive) and excludable (unique) define private goods (e. g. , food, clothing, haircuts, etc. ). In an economic business environment, Wal-Mart provides products and services to private sector consumers to generate profit. Watkins (2100), â€Å"Private goods are such that if one person receives more of them then necessarily there will be less for the other people. In contrast, public goods are those things that all people can simultaneously benefit from† (Nature of Public Goods). By definition a public good is one non-rival and non-excludable. Competing with rival competitors and guided by customer demands; public goods and private goods do not interrelate, but contrast by nature. Although Wal-Mart uses natural resources (e. g. , oil, gas, and water) that may equate to higher expenses, the prices on marketable products sold correlate to consumer demands, consumption, and competition. Common resources (e. g. , electricity, and natural gas) refined and sold through non-rival (non-direct) competitors provide adequate supplies to Wal-Mart facilities without diminishing, or reducing utility supplies to other entities. The goods that are non-rival but excludable involve a natural monopoly. According to  Auburn university  (2005), â€Å"Theoretically, natural monopoly arises when there are very large economies of scale relative to the existing demand for the industrys product, so that the larger the quantity of the good a single factory produces, the cheaper the average costs per unit get right up to production at a level more than sufficient to supply the entire demand in the relevant market area† (Natural monopoly). How Labor Market Equilibrium is Affected by Supply and Demand of Labor Labor equilibrium is the complete balance between the supply of labor and the demand of labor. Companies like Wal-Mart that sell and provide goods and services in the market of supply and demand are part of a buyers’ market in the labor market. When the market supply and demand are in a state of balance to one another and prices become stable it is considered to have reached a state of equilibrium. The labor equilibrium is affected by the supply and demand of labor if the supply of labor is greater than the demand of labor. The demand for labor is determined by the conduct of profit maximizing firms and how the marginal revenue product curve shifts to describe the amount of revenue added by each additional worker Wal-Mart hires. A demand labor curve shifts when there are changes in the price of good or service that a firm like Wal-Mart sells, and by changes in labor productivity for example, the introduction of new electronics. The supply curve for labor represents the behavior of the individual and the decision of how much labor to supply for a given wage, labor supply curve shifts if the individuals’ preferences for work over leisure change as most individuals tend to tradeoff between labor and leisure. Wal-Mart needs workers to sell, package, and distribute the products sold from its stores. References: Scherer, Frederic M., and David Ross. 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