What factors determine whether a market will be competitive or not
There are many different factors which determine how competitive a market will be. In this essay, I will be looking at these factors and seeing how they are applied to the different types of market structures, such as perfect competition, oligopoly and monopoly. Examples of how these three market structures vary are in terms of the number of firms in the industry, the freedom of entry and exit into the industry and the nature of the product which they produce. ... However, a better way of doing this would be by using concentration ratios, which informs us of how concentrated the market is. I will be focusing on the factors which effect this concentration in the different market structures. A perfectly competitive market has low barriers to entry and exit. This means that it is easy for firms to infiltrate into a market that already exists. In reality, there are few examples of perfectly competitive markets because it is an idealistic economic model, but the agricultural industry is perhaps the one that comes closest to this type of competition. One of the reasons for the numerous suppliers of agricultural goods in the UK, for example, is the fact that initial costs are not very high, thus making it affordable to set up in the industry. The fact that it is not difficult to exit the market is also appealing because if a firm sees that it is not making profit, it can choose to leave without affecting the market price. This creates competition in the market because existing firms are aware of the ease with which another firm can enter the industry and since it cannot affect the price in the industry, it will compete with other firms in terms of quality and reputation. ... They may deliberately make it difficult for new industries to set up by, for example, lowering the price for a good when a new firm tries to enter the market so that consumers do not buy the good from the new firm as the old firm offers the same good at a lower price.