Market Structure Paper

The Four Different Market Systems in an Economy

University of Phoenix

Everyone has eaten at least once at one of the many thousands of McDonalds or Burger King’s around the world. Most consumers consider the price of their signature hamburger sandwich very affordable. But how is the price of for example the Big Mac or The Whopper established? Do both companies compete against each other or are their products so different and unique, allowing them to create a monopoly or oligopoly? The supply and demand of both the Big Mac and Whopper will depend on price, taste and marketing. Some consumers will prefer the Whopper above the Big Mac, and as such will be prepared to pay a higher price for the Whopper. But only to a certain price level, than consumers will switch to the Big Mac. The functioning of McDonalds and Burger King in our economy is established and “artificially ruled” by one of the four economic market systems, these are; the perfect competition, the monopoly, the monopolistic competition and the oligopoly. This paper will review the functioning of the market systems using examples from the labor to the “hamburger” market.

Public goods are not consumed by individuals but by society as a whole and are supplied through taxation by the government, such as national defense, law enforcement, and national parks. Private goods, such as hamburgers, are an item of consumption, and once consumed by an individual may not be available to others, such as food and clothing. Private goods are usually provided by private businesses. Common resources are goods that are renewable resources, and as long as they are managed properly to avoid over-use can be preserved for future generations, such as water, air, and land. A natural monopoly occurs when one provider of a good/service more efficiently meets the public need than two providers would, such as public utility companies.

Public goods and common resources can share functions, such as national...