The paper "How Market Structures Determine the Pricing and Output Decisions of Businesses" is a wonderful example of an assignment on business. In the business world, firms are not at liberty to make their own prices with the aim of maximizing profits. Their pricing strategies are often affected by the market structure in which they operate. Managers should therefore be in a position to respond to the market structures in which their organizations operate. The market structure also influences the level of competition. It should be noted that pricing is one of the major competitive factors of an organization.
For instance, an organization whose goods and services are low priced is likely to attract more customers and hence is likely to be more competitive. It should therefore be noted that the pricing power of an organization is highly dependent on the level of competition which is in turn influenced by the market structure among other factors. In fact, firms to a large degree are not able to influence prices unless they are producing unique products. Determination of prices is a very crucial aspect of micro-economics.
Managers of organizations are expected to understand the market and acquire knowledge regarding the market in order to make perfect decisions on pricing. There are different market structures that can exist in different markets and that affect pricing and output decisions. They include; perfect competition, monopoly, monopolistic competition, oligopoly, and duopoly (Wetherly & Otter, 2013). In a perfectly competitive market, there are no large firms that hold the power to set prices for homogeneous goods. There are a large number of firms as well which sell or deal with homogeneous goods (Dwivedi, 2009).
All firms are of equal size and none of them possesses any degree of control. The total output of an organization represents a small proportion of the total demand and therefore they cannot affect the price by varying their supply. In this kind of market, firms are price receivers rather than price setters. In a monopoly market, there is only one single seller of a product and there are no available close substitutes. It is the kind of market where there are significant barriers to entry.
The organization controls the supply of the product and in doing so it can affect or influence the prices (Dwivedi, 2009).
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