Economics: Market Structures and Housing Affordability Crisis

Running head: ECONOMICS
Economics
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ECONOMICS
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................6
Answer 3..................................................................................................................................10
Reference list............................................................................................................................14

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ECONOMICS
Answer 1
The market structure of the perfect competition is such that there is a presence of huge
number of buyers as well as sellers and everyone so engaged in either selling or buying the
homogenous products that is prevailing in the market. the features of the perfect competition
include:
Large number of buyers and sellers: in case of perfect competition there is a presence of large
number of buyers as well as sellers in the market. for this reason, the single seller or buyer
will not be able to influence the output or the price in the industry. Therefore, an individual
customer or an individual seller cannot affect the price of the product since it will be too
small in relation to the whole market.
Homogeneous product: the products that they sell in the market is completely homogeneous
in nature such that no single seller will be having preference for a particular seller over the
others. As the products sold in case of perfectly completive market are homogenous in nature,
an increase in price will let the customers to go to some other suppliers.
Free entry and exit of the firms: when there are presence of perfect competition in the market,
the firms can enter or leave the market whenever they feel. This states that when the firm will
be suffering from huge loses as a result of intense competition, then it can freely leave the
market and can begin its business operation in any of the industry. Therefore, there is absence
of any restrictions on the mobility of the sellers.
Under the monopoly market structure, the firm will be having full control over the supply of
the product. The elasticity of demand will be zero for the products and there will be only a
single seller in the market.

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ECONOMICS
One seller and large number of buyers : as there is only a single firm, the firm is considered
as industry. However, in this case the number of buyers is assumed to quite large.
Absence of any close substitutes: there will be absence of any close substitutes for the goods
sold by the monopolist where the cross elasticity of the demand between the product of the
monopolist and the others is known to be zero.
Closed entry of the new firms: there will be either artificial or natural restrictions on the entry
of the new firms even when the firms will be making abnormal profits.
Price maker: under the monopoly, it is known to have full control over the supply of the
commodity. Buyers need to pay fixed price by the monopolist. Monopolist will be having full
control over the supply of the commodity and there will be large number of buyers and
therefore the demand for one buyer will be known to be only the small part of the total
demand.