MARKET STRUCTURE

Market Structure: Jamie's Kitchen

Market Structure: Jamie's Kitchen

Literature Review

Market structure can be explained as the organizational and other aspects of a market.

Introduction

In general terms any market can be very well defined as a group of economic agents, usually organizations and persons individually, who interrelate with each other in a buyer and seller kind of relationship. It is extremely important that for the sake of maximize profits or shareholder wealth; managers must utilize all the available information that they have as far as demand and costs are concerned in order to establish strategy or any kind plan with regards to price and output and also other kinds of variables. However, it is important to note that managers should also be aware of the type of market structure in which they work and operate, since this has implications for strategy, this applies both short-run decision making and to long-run decisions on changing capacity or entering any new market (Wilkinson 2005, pp. 289).

Discussion

Nearly all economists have classified market structures into four major types, which are perfect competition, monopoly, monopolistic competition and oligopoly. It is important to note that all these market structures are different on the basis of a number of characteristics for instance, number of sellers, types of their products, hurdles to entry, power to affect, costs and also on the basis of the4 extent and the type of non-price competition.

Monopolistic Competition Structure

The restaurant industry in the United Kingdom is best described by the monopolistic competition structure of market. Monopolistic competition is such kind of market structure that occurs in any market in which there are a number of different kinds of firms competing and each one offers a different and new kind of product altogether. For instance, thousands of restaurants and even cafes compete in the market of United Kingdom. Although they compete in the same market, there are a number of differences between them which makes every restaurant special for instance; every restaurant offers their own menus, display unique themes and different locations. These are such factors which can influence decision of people when choosing between them. This also means that the restaurants and also cafes involved in this kind of market structure can also have some kind of control over their market and the ability to decide what prices to charge (Gillespie 2011, pp. 230).

Short and Long Run Equilibrium Position

In the short run, any kind of monopolistic competition structure of market resembles monopoly while on the other hand; in the long run entry by a number of new kinds of firms and organizations generally leads to a more competitive structure of market.

Given at the current scenario, the restaurant is currently running at a loss which is also demonstrated in the graph below.

The given price is P2. In this case, it is clear that the restaurant will not be making a profit. The AC curve is over the AR curve on every output and the restaurant will still needs to lower ...