Differentiating Between Market Structures

Market Structure Paper

A way to distinguish between different market structures is to look at the number and size of producers and consumers in the market and the type of goods and services traded (PPIF, PRUC, The World Bank, 2011). This paper will give an overview of what factors affect supply and demand and how market equilibrium is affected by the changes in the supply and demand. The characteristics that make up Western Shield’s market structure are in this report. This paper will further discuss how labor supply and demand are affected by different factors such as decreased sales. Goods and services are categorized by whether the consumption of the good or service will prevent another individual from consuming that same product or if that same individual is excluded from the consumption of that product.

Comparing different categories of goods and services

A private good is rival and excludable. Rivalry occurs when one person consumes a good or service that cannot be consumed by another person (Hubbard & O'Brien, 2010). For example a Sprinkles cupcake is a rival good. Once the cupcake is eaten, it cannot be consumed by another person. Excludable means that Sprinkles can exclude anyone from eating a cupcake that does not pay. In contrast, public goods are non-rival and non-excludable. Non-rival means that consumption of a good or service by one person does not reduce the availability of the good or service for the consumption of another person. A non-excludable good or service means that no one can be effectively excluded from using that good or service.

Common Resources are similar to public goods but are rival and non-excludable. An example of a common resource would be fishing for lobster. The lobster is a rival good. However, the spot where the lobsters were caught is in public waters, making it non-excludable. If a common resource is not monitored it can cause tragedy of the commons that occurs when over use of...