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Econ 415 - Business and Competition

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Business and Competition


Susan Schunke


Dr. Beth Xie





Any business is a competitor in one way or another of any other business out there. It can be by product, price, service, or cost of the unit. There must also be minimum loss and maximum profit; this tells the business owner whether to sell the product for a short or long period of time. In every business there is also supply and demand of products and services. For each business there are four different market types.

1. Perfect competition: a market where no corporation is large enough or has the power to set the price on any certain product.

2. Monopolistic competition: a market that has all of the traits of a monopoly, high prices, supply constraints, one supplying firm; they can raise prices without affecting product or service demand.

3. Oligopoly: a market shared by many producers or sellers, there is limited competition.

4. Monopoly: a market that can sell any item at the current price rate in any desired quantity, but they cannot sell any item above the market price.

There is no such thing as a perfect competition, in any given product or service. There has been and always will be fierce competition to be better, faster, cheaper, and stronger. In the food industry, retail, automotive, and the stock market there is a competitive need to beat the competitor at his or her own product or service. Everything must be made better, cheaper, faster, and stronger than anyone else including the competition. In the stock market the stock must be sold at a cheaper percentage rate and give a bigger return than what the banks are willing to allow.

Wal-Mart is an oligopoly; they can't be a monopoly because they are not the only company in their market. Target is Wal-Marts competitor. Wal-Mart is also a price maker because it has the lowest prices in the market. "Wal-Mart's prices are so low; other retailers must also drop their prices in order to compete with Wal-Mart" (Wal-Mart, 2011). Out of $2000 in sales Wal-Mart only makes $75, with their low prices the typical American family saves approximately $600 a year.

There is no such thing as a perfect monopoly in the economic market; there are some that come close are Microsoft and the U.S. post office. "By equivocating on the term monopoly and keeping it ambiguous it becomes an anti-concept so that: a company that has earned 100% share of a given market (actually Microsoft does not have 100% of the O/S/ market but has over 90%) is morally condemned" (Capitalism.org, n.d.).

In all market types there has to be a limit put on all products or services for the economy to be able to afford them. There are even limits to what can be done for the environment to be safe, green, and affordable. There is a limit as to how much people can spend and afford to buy. There are some market types that are clearly competitive; others are there to help the economy when a recession is happening.

In perfect competition price strategies are affected by



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