Differentiating Between Market Structures Simulation

Jannie Tolliver

Differentiating between Market Structures Simulation

ECO/365

Darrell Neron

January 25, 2010

There are four market structures in today's economic markets. It is important that an organization knows the difference between the four market structure, because it will allow the organization to realize which market that they fit in and where they could maximize their profits. The Differentiating between Market Structures simulation gives a hands-on-experience to assist in the understanding of the different structures. First, this paper will define the term and concepts that concerns market structures. Next, this paper will discuss the simulation, the advantages and limitations of supply and demand identified in the simulation. Then this paper will apply the concept of market structure to the organization that I work for. Finally, this paper will analyze how organizations in each market structure maximize profits.

BusinessDictionary.com defines the term market structure as "interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market" (BusinessDictionary.com, 2010).

Four Market Structures:

Perfect Competition - The Consumer Good's Division of East-West Transportation Inc. operated in a perfect competitive market structure, which allows for perfect elasticity of demand. A perfect competitive market structure has "a large number of buyers and sellers" (University of Phoenix, 2010)This will allow them to be able to distribute goods more efficiently. There are limitations of supply in this type of market. When the price is accepted, a profit can be made if the price is more than the total cost. If the price is under the variable cost, no profit is made.

Monopoly - The Coal Division of...