Discuss how the nature of the market structure relates to the market outcomes observed. Market Selection You
Question:
Discuss how the nature of the market structure relates to the market outcomes observed. Market Selection You must clearly define the market that you are analysing.
Economic Analysis
The exact details of your analysis may depend on what is appropriate for the market selected. In most cases many of the below will be relevant, but not all will be relevant to all cases. You should focus on what is most relevant to your market to draw out the key relevant concepts for your case. A coherent argument should be presented around this. Do not simply go through the dot-points below sequentially or use these as subheadings. Topics that may be useful to address:
How well the market fits the assumptions of the model
The nature of the product (eg. differentiated?)
Factors about the production technology of the product, such as: Are there economies of scale? How might the minimum efficient scale compare to the size of the market? Are there any other interesting aspects of the cost structure that might be an important part of the story regarding the type of market observed, the pricing, or profits?
How large is the number of competitors?
What is the degree of market power of firms in this market?
How do firms compete or set prices in this market?
Are there significant barriers to entry?
What outcomes do we observe such as prices, mark-ups, profits and firm entry/exit?
Are there positive economic profits, and would this be a desirable market to operate in?
It may be useful to contrast short-run and long-run responses in the market to changes in demand or supply factors, or more particularly to economic profits
Is it an increasing-cost or decreasing-cost industry, and is this relevant to the analysis? Real world markets often do not perfectly meet the assumptions of the models, so in many cases you may also discuss (if relevant) which aspects of the real-world market do not fit the model (or are closer to a different model) and which aspects of market interaction or outcomes are not well described by the model selected. Where market diagrams are used, they should be your own diagrams, whether prepared in a computer software, or (often more easily) hand-drawn and a scan/photo embedded in the document.
Expert Answer:
Answer Lets consider the market for smartphones as an example to analyze how the nature of the market structure relates to observed market outcomes Fit to Assumptions of the Model The smartphone marke... View the full answer
