Different Market Structure and their Effects on Consumers and Producers.docx

different market structure and their effects on consumers and producersmonopolistic competition and oligopoly market structure exist in some business areas in our society. as the society developed, more and more different goods come into our life. when people choose goods that they want, some people make decisions based on the goods price, and another people choose goods decide on the performance of the products, for example, some people just use exclusive cosmetic, this situation is called brand loyalty (ison and wall, 2006, p148). this essay will show which market structure is better for consumer. firstly, this essay will define the monopolistic competition market structure and oligopoly market structure. after the definitions i will show their effects on consumers and producer. finally, this essay will compare the two market structures.firstly, this essay will give definitions of monopolistic competition market structure. as the term suggests, the theory of monopolistic competition incorporates features of both perfect competition and monopoly (samuelson and marks, 2006, p455). the same as the perfect competition market, there are many sellers in the monopolistic competition market. however, “unlike perfect competition each firm produces goods and services which are slightly different from those of their competitors” (ison, and wall, 2006, p147), for instance, different firms produce the similar products have different performance and different packaging. in such a market, many consumers have a product-dependent, therefore, “firms in the monopolistic competition market have a certain degree of monopoly power, so that if they raise their price they do not lose all of their customers” (ison, and wall, 2006, p148). in the short-run, some firms have their own monopoly status in some consumers and the short-run equilibrium is similar to that of a monopoly in the monopolistic competition market.oligopoly refers to there are only a small number of sellers in the market, in fact, the number of firms in an oligopoly market “may be as small as two or as many as eight to ten” (samuelson and marks, 2006, p473). those few firms control the whole market, and the goods supplied by these firms accounted for the largest share of the market. “in this sense, the fates of oligopoly firms are interdependent” (samuelson and marks, 2006, p471). therefore, the decision makers need to consider the reaction of competitors. in general, the oligopoly exists in some industries which the technology is highly concentrated, for example, steel, automobile, petroleum and other industries.there have some advantages and disadvantages of the monopolistic competition market. most of monopolistic competition exists in the light industrial market. there are a large number of producer in the monopolistic competition market, therefore, people have more choices when they face a lot of the similar goods. peoples demand for a certain type of goods not limited by any factors and depends entirely on their own, they can choose the goods that suite to themselves. in such a market, including price competition, quality competition and marketing competition (wells, 1969, p68). therefore, producers in the monopolistic competition market need to spend more money on advertising. firms can ignore the reaction of their competitors in this market because of their own impact on the overall market is very weak. at the same time, producers are relatively small production scale, therefore, it is easier to enter and exit the market.oligopoly market structure also has strengths and weaknesses. firms in oligopoly market almost are large-scale producers, for example, microsoft corporation. there are only a small number of producers in this market, so that people do not have sufficient autonomy to select goods. sometimes the oligopoly market is close to the monopoly market, consumers in the market just have the only choice, because they have special requirements for certain goods. the original producers almost are large-scale, therefore, it is difficult for a new firm to enter this market, at the same time, it is also difficult for the original producers to withdraw (wells, 1969, p100). however, firms in the oligopoly market have a strong economic strength, they have small risk of bankruptcy. there are many differences between monopolistic competition market structure and oligopoly market structure. for the consumers, they have more freedom in monopolistic competition market than in oligopoly market and for the producers, they can be more stable and have a long-term development in the oligopoly market. firms in the monopolistic competition market can change the price of their goods quickly according to different cases. price of the goods in oligopoly market changed is passive. this diagram shows if the firm raises its price above the p1, the demand curve will become more inclined. in another words, the demand of other firms have a relatively elastic, these firms will passive rise their price (ison and wall, 2006, p151). in conclusion, monopolistic competition market structure and oligopoly market structure exist in different industries. they both have positive effects and negative effects on consumers and producers. relative to oligopoly market, monopolistic competition market structure best serves the interests of the consumer, because consumers can choose goods which they prefer in the monopo