Business in Economics

Business in Economics

Introduction

It is important that both the company and the industry as a whole operate without surpluses and deficits. In fact, the demand curve under perfect competition coincides with the marginal revenue curve (D = MR), and the supply curve - with the marginal cost curve (S = MS). Therefore, the condition of long-term equilibrium in a perfectly competitive industry actually means equality of supply and demand for the product (as MR = MC, then S = D). Therefore, we can say that perfect competition leads to optimal allocation of resources: industry involves them in production exactly to the extent that is necessary to cover the effective demand.

The electricity market is a special market due to the product by the offered which is electricity. The main features that distinguish this market from other possible include the fact that electricity cannot be stored and the demand and supply must be balance in every second of the market. The electricity market and each market is a kind of platform, location where there is a contact between the buyer and the seller, subject to market is specific good (in our case it is the electricity). It is the total contact supply with total demand, and these two quantities as a result give us the average level of prices (Price, 1997).

Principles of electricity retail market are relatively simple. In the area of regulated retail market, where the main actors are end-users, the distribution companies provide energy supply for these customers, and the marketing of it takes place. The electricity market in UK operates on two main levels as the market for wholesale and retail. Each of these markets is divided into two areas: competitive and regulated. Their existence is dictated by the technical characteristics of the power system and the need for the timing of the implementation of the electricity market.

It is well known that in this context, companies can learn to coordinate strategies, being aware of the possible deviations of a strategy aimed at raising prices would be frustrated by the reaction of its competitors at the time that the diversion was detected. Thus analysis of competition in electricity markets has not only to discern whether is or is not manipulating the market, but also whether the potential manipulation produces the effect of a static or dynamic behaviour (Helm, 2002).

How Competition Leads To the Most Efficient Outcome in a Market

The concept of economy of market is one of the main foundations on free competition resulting from free competition in the market of vendors that produce similar goods or services and, in turn, consumers who make free choices about their purchases in market with sufficient information on the characteristics of price and quality of the products, not involved in these decisions than those same market forces. The concept of competition is usually applied in a country, and taking into account national and foreign goods. Therefore, the policies of free competition and free trade are closely ...