The Economic Problem of Scarcity and Resource Allocation

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Monopoly: The opposite form of the perfect competition is known as monopoly. In the monopoly marketing system there are only just one producer for a good or service. So if someone wants to buy this product he has to buy it’s from the particular producer who produce it.

Oligopoly: The oligopoly is almost similar to the monopoly. In this market system there are handful of producer who can produce this product hand fully. Here the producer can be more than one but they have to dominant on the market system production.

Monopolistic Competition: The elements of monopoly and perfect competition both are the elements of monopolistic competition. In this type of market system there are exist numerous number of competitors.

Monophony: The market systems are not always differentiated on the basis of the supplier’s number. It can be differentiated on the basis of the number of the buyers (Carter, n.d.).

If a company determine the one of the above policy for his marketing system, this company will must profit and they will be able to do a good business for understanding the markets well.

1.5 The importance of elasticity in market interactions

The relation between the consumers and the sales is known as income elasticity. In small business the sales falls when the income of the customers are falls. So it is very important for the company to bring elasticity in their business. After researching as an employee of institute of fiscal studies the following impotence are found in the elasticity of the market interactions:

- Types of Customers: Small companies follow a type of strategy which focus on the marketing to attract the higher income consumers in the time of high elasticity. This types of person usually do not pay any heed on the price changing situation. So the business man also target this type of consumers.

- Determine Income Elasticity: By the marketing research survey it is easy to determine the income elasticity. The companies can divide their customers on the different income groups. And after determining they can find out their income and needs which is very helpful for the companies to take the next steps effectively.

- Types of Products: In the elasticity time the certain products are affected by it. In the time when elasticity is high the consumers take care about their basic needs product. So business owners also try to sell the basic products at that time.

- Product Life Cycle: In product life cycle management the income elasticity also comes. In the introduction and the growth stage the demand of the product is on high. In that time it is challenge for the companies to overcome the extra need of the customers (Dobson and Dozois, 2008)..

Task 2 Understand the impact of market power on an economy

2.1 The implications of pricing and objectives on a business firm’s operations

Price is very important component of marketing mix. Which is also known as “four p’s”. Here the others are product, promotion and place. The supply and demand effect on pricing but the most affecting factors of pricing are given below on the basis of British telecommunication multinational company.

- Profit: The profit can be measured on two way. One is direct and another is indirect. The direct way is to sell the product on a higher price. And the indirect means to sell the product on not to the higher price to sell the product on a big quantity. The BT telecommunication multinational company focus mostly on the indirect profit.

- Survival: Price is a flexible matter. A company can keep it lower for getting more sells to continue the business. The BT multinational company follow this strategy in their first stage of business much for survival in the market.

- Sales: Sales means the actual selling quantity in a certain period. A company should focus on sales mostly what the BT telecommunication company do mostly in their marketing process.

- Status Quo: The status qua is a practical goals which encourage a company to compete with the others rather than price. The BT multinational company follow this strategy also (Goldsmith, 2001).

2.2 How prices are set in different market structures

And

2.3 How a firm’s behavior is affected by: ● their market structure ● operations

Price is very important for any company. In different market structures it is settled in different way. The behaviors of a company like BT is affected by the operations and the structures of the market. The both things are illustrated below by investigating on the different market structure of BT multinational company.

- Perfect Competition: In a perfect competition a company like BT has to compete with many companies. So here the price have to set after determining the price of others companies. And here the behavior of the companies must be good with the customers as here a lot of companies are exist.

- Pure Monopoly: In the monopoly market structure a company can set their product price not utilizing the other companies as here no company is exist. So the behavior of the company in this type of market structure is not so well as the perfect competition.

- Monopolistic Competition: The monopolistic competition is both the monopoly and the perfect competition. Here the price is settled by observing the whole situation and the behavior is better than monopoly market structure.

- Oligopoly: In oligopoly market system here exist more than one companies who operate business here. So in this market a company has to set their price after determining hteir actual production costs as in this structure there are given more concentration on the production. So behavior will be very good in this type of market structure (Jacobsen, 2011).

The above four market structures are the structures which is followed by the BT Company in many countries and in many areas also.

2.4 The impact of regulation on market power in given situations

There are some regulation in UK. These type of regulation can create impact on the organization like BT. The regulation of UK and their impact on the BT Company is given below:

- Penetration Pricing: A small company can use the penetration pricing to sets the low price of their product to build their market share. This is a regulation of UK and this type of regulation can be maintain by the company BT to build up their market share.

- Product Life Cycle Pricing: A product