Pricing and Output Decisions under Different Market Structures and Impact of Market Forces on Organizational Responses

TASK 3 and 4
Business Environment

3.1 Pricing and output decisions under different
market structure
Market structure refers to the number of organizations
who produce identical types of goods in the market.
Pricing and output decisions under different market
structure have been described here as under:

Types of market structure
Perfect market: Large number of buyers and sellers,
homogeneous products and high consumer
awareness are the characteristics of this market.
Moreover, competition level is very high henceforth,
prices are decided through considering competitor’s
product prices. On contrary, output decisions are
taken by analysing current sales and consumer
demand. It helps to determine the quantity which
firm needs to be produced to meet customer demand
for the future period. Any firm can enter and exit
from the market at any time.

Monopoly market: In this market, only a single producer
delivers products and services to large number of consumers.
Thus, firms own decide their product’s prices with the
objective of maximizing its earning and profitability. However,
current market demand is the basis for output decisions.
Oligopoly market: Only a few firms operate in this market
structure; henceforth price decisions are very much affected by
competitor’s product prices. In case, when rival firms change
their prices then the other organization will also need to change
prices accordingly. For instance, when a competitor falls their
prices and other firm does not change their prices then their
sales will be declined.
Contd.

3.2 Impact of market forces on organizational
responses
Market forces includes followings elements:
Supply and demand.
Elasticity of supply and demand.
Interest rates.
Governmental.
Political.
Technological.
Legal.
Environmental.

Contd.
Impact of changing demand and supply on the
product’s prices is described below:
Supply and demand: Quantity of goods which
consumer wants to purchase at a specified time and at a
fixed price is called demand. However, quantity of
available goods in the market is called supply. In
context to Global tech, increase in consumer’s demand
and fall in supply will result in increasing its product
prices. On contrary, reduction in demand and high
market supply will result in price reduction.