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Economic Concepts

Economic Concepts

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Economic Concepts

Monopoly

Monopoly refers to a scenario where a single person or business takes the sole responsibility of supplying a particular product. A monopoly market is in such a way that some elements such as patent and copyright, the ownership of resources, the license the government provides, and an increased cost of commencing the business make an institution the sole provider of goods and services (Samuelson & Marks, 2005). Monopolies also have the power of setting and regulating the prices. I thought that the government or the manufacturers, or even the producers have the authority of setting the prices regardless of the fact that one party dominates the market or not but I now understand that other institutions may be in charge of setting prices only when various entities play equal roles in supplying particular goods.

Natural Monopoly

A natural monopoly develops in a market that need raw materials that are difficult to acquire, or where sophisticated technology is required to accomplish a task (Sharkey, 1982). The difficulties that make it difficult to enter a particular market give one player that can avail the requirements the opportunity to supply specific goods. Natural monopolies may occur in a scenario where one supplier offers products at relatively lower prices compared to other entities thus creating the chance to attract more buyers. Acquiring information on how the market functions concerning natural monopoly clarify that several players may be issuing services or goods in the market which has confused me for many years. The research makes it clear to me that one company or supplier may dominate the market because of its ability to overcome the challenges that make it difficult to enter the area of operation.

 

Price Discrimination

Price discrimination refers to a pricing strategy in microeconomics whereby sellers charge consumers different prices for a similar service or good. A market where the concept of price discrimination is fully applicable is in such a way that the supplier charges prices depending on the maximum amount each buyer is willing to pay (Samuelson & Marks, 2005). The supplier who practices price discrimination in many cases categorizes the consumers in different groups while following specific guidelines regarding the buyers. The research on how the concept of price discrimination works makes it clear to me that the seller must be considerate when setting higher or lower prices. The investigation makes it clear to me that setting higher rates for customers who cannot pay the amount either due to their economic status may result in losses because only a few individuals will be able to purchase the goods or services.

Monopoly

Monopoly refers to a market where a single supplier takes charge of the market without facing competition from other entities. The operator in a monopoly determines the markets to supply its goods but it is not free from the regulations set by the government (Samuelson & Marks, 2005). The buyers in a monopoly market have no option but to pay the prices set by the seller or provider of goods and services. I learn from the study on how a monopoly market functions that the buyer power to bargain is relatively lower compared to a setting where many suppliers function, and therefore the rate of supply is quite high. I also become aware that no other supplier is available in a monopoly market to offer similar goods.

Natural Monopoly

A natural monopoly exists when one company decides to give its goods or services at lower rates compared to other investors in the same sector. The operator who monopolizes in a natural monopoly uses the technique of issuing products and services at cheaper prices to gain competitive advantage and to attract more buyers based on the fact that more buyers would prefer to buy from stations that do not charge expensive rates (Sharkey, 1982). A natural monopoly may also exist in a situation where other players not have the ability to afford the high entry cost, or are not in a position to acquire the raw materials that are required in this area. I learn from the investigation on how a natural monopoly works that various suppliers may be giving the same goods or services but the one who provides enticing offers win a larger portion of the market.

Price Discrimination

Price discrimination refers to a situation where a seller sells products at a cheaper price to some consumers, and sells the same goods at a higher rate to other buyers. The seller in this case identifies the consumers who are in a position to pay higher rates, and also categorizes the buyers who will pay relatively lower amounts (Samuelson & Marks, 2005). A seller may decide to offer goods at higher prices in a market where people have higher income, and may decide to give products at lower prices in a setting where a majority of the consumers get lower income. The study on how the concept of price discrimination works informs me that the decision on whether to sell at higher or lower prices rests with the supplier who must know the nature of the buyers.

 

 

 

 

 

 

References

Samuelson, W., & Marks, S. (2005). Managerial economics. New York, NY: Wiley.

Sharkey, W. (1982). The theory of natural monopoly. Cambridge: Cambridge University Press.

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