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The Monopolistic Competitive And The Perfectly Competitive Models.

4274 words - 17 pages

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Introduction

What is Economics?

Economics is the branch of social science that deals with the production and distribution and consumption of goods and services and their management. It is the study of how individuals choose to use resources, the study of choice and decision-making in a world with limited resources and the study of how societies allocate and manage their scarce resources

Although the behavior of individuals is important, economics also addresses the collective behavior of businesses and industries, governments and countries, and the globe as a whole.

The field of economics is broken down into two distinct areas of study: Microeconomics and Macroeconomics.

Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.

Macroeconomics, on the other hand, looks at the big picture (hence "macro"). It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels. The focus of macroeconomics is basically on a country's income, and the position of foreign trades, with the study of unemployment rates, GDP and price indices.

A market is any one of a variety of different systems, institutions, procedures, social relations and infrastructures whereby persons trade, and goods and services are exchanged, forming part of the economy. It is an arrangement that allows buyers and sellers to exchange things.[1] Markets vary in size, range, geographic scale, location, types and variety of human communities, as well as the types of goods and services traded.

In Economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price. This influence is a major study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand.

Main Types of Market Structures/Models

In general we classify market structures into four types:

Perfect competition - many producers of a single, unique good.

Monopoly - single producer of an unique good (e.g. cable TV, diamonds, particular drugs)

Monopolistic competition - many producers of slightly differentiated goods (e.g. fast food)

Oligopoly - few producers, with a single or only slightly differentiated good (e.g. cigarettes, cell phones)

Other...

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