Various Kinds Of Market Systems

Market equilibrium achieved

Market equilibrium is a situation under which both demand and supply is going to equal based upon a single price and it is said to be a situation of equilibrium within the market. This situation is also said to be a clearing price because it is a price that has the potential of utilizing the exact supply demanded by the consumers. This aspect is said to be efficient as there is no excess of supply or waste of output and it is said to be a clear efficient market. Let’s examine this state with an example;

 

The above table indicates that market would be in equilibrium for the price of £70p per canned mixed fruit juice. It is because on this particular price the quantity demanded as equalled quantity supply within the market. Further, in this regard it could be said that market is going to offer 600 canes of mixed fruit juice for the price of £70p and all these 600 canes would be purchased by consumer from the market and there would be no excess demand or supply of product within the market at that particular period of time.

Importance of various market systems

In an economy it has been observed that there are various kinds of market systems. The importance of the market system for an organization is completely depended upon the industry in the business has been undertaking their activities. In this regard it is essential for the enterprise to look after the market system under which they are carrying out their working. This helps out business in carrying out appropriate decision making concerning their price and production. One of the market systems is perfect competition and under this case there are larger number of buyers and sellers within the market for carrying out activities. From this market it can be said that no individual firm has the potential of laying down changes in the prices of product prevailing within the market. However, in case of monopoly there is only one single seller in the market and the importance that can be drawn in this regard is that seller can carry out discrimination of price based upon their. On the other hand, monopolistic market has got the importance of both monopoly and perfect competition.

Role of opportunity costs for economic decisions

Opportunity cost is all about the decision that is undertaken out of various alternatives that are available within the market by business for enhancing their profits and reduce their costs. It is also said to be a forgoing cost as business undergoing a particular selection of choice need to forgo different other alternatives available within the market. Hence, in this regard business need to undergo effective decision making process for choosing the best alterative that maximizes profits and cut down the cost of the business. For example:

Celsa Steel organisation has got various opportunities in the market to carry out a purchase of new unit of steel for expanding their operations.

Tindicates about the various opportunities that are available for Celsa Steel organisation as could be seen in the figure that are A, B, C and D. Hence, out of these various alternatives it is essential for the company to carry out decision making of selecting one particular unit of steel production that has potential of enhancing business profits and lower down the cost. The decision making must also be based upon the price that is required for carrying out purchase of the unit and whether it is feasible project for undergoing a purchase process. Once going through all the aspects Celsa Steel organisation must carry out purchase of steel production unit that has potential of generating higher benefits in the future periods.

Importance of elasticity in market

In relation to Celsa Steel organisation it has been identified that their demand curve is seen to be perfectly elastic in comparison to market elasticity of demand.  Hence, the major justification that can be laid down in this regard is that within the market of UK there are very few substitutes who have been carrying out production of steel at market level than at a firm level.