As a result, perfect competition produces the lowest prices and the greatest quantity of goods and services. Since perfect competition is so competitive, it has a very low level of market power. The companies in this market structure have no ability to raise prices above the equilibrium price....
Market power can be understood as the level of influence that a company has on determining market price, either for a specific product or generally within its industry. Take, for instance, Apple Inc. in the smartphone market. Although Apple cannot completely control the market, its iPhone produc...
In economics, the term “barriers to entry” describes the factors that prevent outside parties from entering a given market. Generally speaking, the higher the barriers to entry, the more limited the competition within an industry would be – all else being equal. From the perspective of indus...
In the field of economics, monopolistic competition refers to a market structure that entails many companies (i.e. sellers) offering a differentiated product but with a virtually identical utility to the end-user. While the products might be largely the same in their intended purpose, i.e. the...
In economics, Competition is a situation in which one company tries to be more successful than another. One business may be trying to sell more than a rival. It may also be striving to gain greater market share. Often, several companies are competing. The word refers to a race, in which...
In this lesson, the conditions and definition of monopolistic competition were introduced. A monopolistic competition is an industry somewhere on the continuum between a pure monopoly, where a single firm holds all market power, and perfect competition, where many firms exist and each is a perfect...
Introduction to Stochastic Finance with Market Examples, Second Edition presents an introduction to pricing and hedging in discrete and continuous-time financial models, emphasizing both analytical and probabilistic methods. It demonstrates both the power and limitations of mathematical models in finance, ...
Market dynamics are the forces that impact prices and the behaviors of producers and consumers in an economy. These forces create pricing signals that result from a change in supply and demand. The basis of supply-side economics is on the theory that the supply of goods and services is most...
What are examples of opportunity costs of public goods? What are the examples of abnormal demand curved? What are some examples of the existence of market power in capital markets? What determines whether or not a resource is considered scarce?
Applications of the Ratchet Effect The ratchet effect can be seen in many areas of economics. Political Economy The ratchet effect first came up in Alan Peacock and Jack Wiseman's work: "The Growth of Public Expenditure in the United Kingdom." Peacock and Wiseman found that public spending in...