How do market structure affect supply and demand?

Answer 1

In a market economy, the prices of goods and services are determined by the forces of supply and demand. The market structure in which supply and demand set prices is called perfect competition.

In perfect competition, there are a large number of buyers and sellers in the market, and each buyer and seller is a price taker. This means that each buyer and seller has limited ability to influence the market price, and must accept the current market price in order to participate in the market.

Another characteristics of perfect competition is that the products offered by different sellers are considered to be homogeneous, meaning they are all essentially the same.

In this type of market, the price will adjust to bring the quantity supplied and the quantity demanded into balance. When there is a shortage of a good, prices will rise and the quantity supplied will increase. When there is a surplus of a good, prices will fall and the quantity supplied will decrease.

It's worth noting that in reality, most markets deviate from the theoretical ideal of perfect competition. There are many markets, such as the retail, where large companies dominate and smaller players struggle to enter. These markets are called oligopoly or Monopoly, and the firms in these markets have more control over prices.

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Answer 2

supply and demand set prices in this market structure