Competition and market structures essay sample


Competition is an economic force that regulates relations within the free market. In the capitalist society, all businesses face some level of competition, which allows consumers to benefit from the races of manufacturers. In the competitive environment, producers learn to be flexible and client-oriented. However, not all markets are free enough to show a perfect competition. Its level usually ranges from perfect competition to pure monopoly. The extent of monopolization depends on the size of businesses and their ability to influence the market in general. Large and small businesses in this respect are differentiated according to the quality of their production, their concentration and differentiation.

According to the level of competition, economists differentiate perfect competition, monopolistic competition,  oligopoly, and monopoly as major market structures. Perfect competition occurs when the free market is full of same-scale enterprises (usually small businesses) that work efficiently and are almost equally popular among consumers. In most cases, they offer an identical product for the same price which intensifies their struggle. In monopolistic competition, numerous small businesses offer differentiated products which are similar enough for the producers not to become monopolists in their part of the market. Oligopoly is common to a small number of producers with a large market share. These businesses do not compete on price factors but use the influence they possess to remain the leader in the field. In case of a monopoly, one business owns the entire market, and no external factors can influence its prices. Regulating monopolies is a difficult but essential task, which can prevent consumers from the unfair policies established by a single supplier.