Differentiating Between Market Structures Case

Differentiating Between Market Structures

John Ryder

ECO/365

7/21/2014

Jong Yi

Differentiating Between Market Structures

        It is important to understand how supply and demand is affected by common resources, private and public goods, and monopolies in order to know the difference between market structures.  Labor market equilibrium is established when directly affected by these structures.  This type of market structure is shown by many different organizations, which labor supply and demand is directly affected indirectly and directly.  Wal-Mart is one company that is an example that uses different market structures that displays their characteristics.  

        There are two major characteristics that are involved in goods that are available for consumption.  Rivalrous goods and excludable goods are two categories that these major characteristics are put into.  Rivalrous goods are goods that are consumed by one consumer which at the same time prevents consumption by another consumer.  Excludable goods are goods that a consumer can prevent another consumer from using that good if they do not pay.  Natural monopolies, private goods, common resources, and public goods are four other classifications that divide goods.  

        Goods that are considered excludable would be private goods.  Private goods are at a low cost which prevents consumers who have not paid for it from consuming those goods and are in rival consumption.  In our economy, most goods will fall under this category.  Designer shoes would be a good example of a private good.  If a consumer is willing and able to pay for designer shoes, they can have it.  Once the consumer has bought the designer shoes, no other consumer can have it.

        Goods that are the opposite of private goods would be public goods.  Public goods are not considered excludable goods nor do they rival in consumption.  Private firms don’t usually supply these goods, but the government usually does.  One example of a public good would be National Defense.  In this situation, one’s consumption will not interfere with another consumer’s usage of National Defense.  A consumer cannot be denied from consuming these goods no matter if they pay for it or not.  

        Another good that is not considered excludable would be common resources, but they do rival in consumption.  There would be a concern for common resources and the usage if there is poor social-management systems put in place.  A good example would be the stock of marlin fishing in a fishing area that is limited.  Everyone is able to go fishing for marlin, but there is a limit set for how many a consumer can catch.  Marlin fishing is also considered to be rival in consumption.  

        On the other hand, common resources can be considered excludable, but not rival in consumption.  Natural monopoly would be this good.  A situation that involves a large fix startup cost and over the range of production there is a decrease in average cost.  This allows a firm to provide its services by the government.  If more than one firm tries to provide the same service in the same market, they would most likely not make a profit and eventually go bankrupt.  A few examples of a natural monopoly like water, natural gas, or electricity, which is single sources of goods, prevents other competition from expanding these goods.