2. Find the paragraphs of the text dealing with the following concepts.

1) the concept of a price; 2) “demand curves” and “supply curves;” 3) the principles of equilibrium.

V. Additional Reading

Read the following texts to learn more about the problem under discussion.

Competition

The fundamental condition for market's existence is competition. Traditionally a competitive market is considered an ideal form of market. As a rule almost all markets where the laws of supply and demand exist are competitive in nature. Competition is said to be Pure and Perfect when six basic characteristics are satisfied.

Pure Competition: The market is said to be pure when

1) there is a large number of buyers and sellers;

2) goods produced and sold are homogeneous, and

3) there is Free Entry or Exit for any producer or seller.

Perfect Competition: Competitive market is supposed to be perfect in every respect. For this three conditions must be satisfied:

1) perfect knowledge on the part of the buyers and sellers about market conditions,

2) perfect mobility of the factors of production, and

3) proximity to the market.

In order to be competitive on the market companies tend to keep to certain marketing approaches – as customer oriented or product oriented. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. History attests to many products that were commercial failures in spite of being technological breakthroughs.

In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that profitable market segment(s) exist for the innovation. Taking risks, marketers, however can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played).

There are some exceptional cases in which certain market imperfections may cause departure from competition. Such exceptions to competition are in the form of monopoly, monopsony or oligopoly.

Monopolistic competition is a modern form of the market. A large variety of goods are sold in such a market. A monopoly is the case of a single supplier that can adjust the supply or price of a good at will. The profit-maximizing monopolist is modeled as adjusting the price so that its profit is maximized given the amount that is demanded at that price. This price will be higher than in a competitive market. A similar analysis can be applied when a good has a single buyer, a monopsony, but many sellers. Oligopoly is a market with so few suppliers that they must take account of their actions on the market price or each other. Each market type has a different impact on the price and quantity sold by the firm. Besides the difference in the number of firms under competition and monopoly there are also qualitative distinctions.