Market structures are organizational or competitive characteristics of the market. The four market structures include are perfect competition, monopoly, monopolistic competition, and oligopoly. A monopolistic competition also called competitive market has a large number of businesses each owning a small proportion of the overall market share with slightly differing products (Tucker, 2017). An Oligopoly is whereby a small number of firms that work together to control the largest share of the market. Perfect competition market is a hypothetical market where there is free entry, and exit into the market and the number of consumers and producers are unlimited (Tucker, 2017). Monopoly is whereby one single firm has total control over the entire market by setting the prices.
Tucker (2017) asserts that in perfect competition, the demand and supply dictatesthe prices no individual firm has control over it, Monopolistic competition, on the other hand, has partial control over the prices. A firm under oligopoly can have control over the prices but instead chooses to maintain the price rigidity policy. Unlike all the other markets, a firm under the monopoly dictates the prices since it exercises full control. The demand curve for firms under perfect competition is elastic since the force of demand and supply is responsible for pricing (Tucker, 2017). On the other hand, Monopoly and Monopolistic competition have a downward slope in the demand curve since they record more sales when they lower prices. However, in Monopolistic competition the demand curve is more elastic due to the presence of close substitutes. Oligopoly firm’s demand curve cannot be determined as the pattern of a producer cannot be correctly tracked.
The Coca Cola Company is a perfect example of a firm functioning under Oligopoly. The market has a few firms operating under the beverage industry. The market, unlike perfect competition, does not have a free entry; entry requires a huge investment and advertising (Schwartz, 2013). The operational costs are high, and this discourages other players from entering the market. To stay dominant in the market, Coca Cola ensures that it provides the best branding for its product, invests in advertisement and differentiates its products to suit consumer needs. Oligopoly has allowed Coca Cola to remain as one of the most popular beverage companies in the world and it has prevented it from getting competition due to the restriction in the market entry (Schwartz, 2013). Entry would require a firm to invest a lot of money and work hard to ensure they are recognized by the market which is hard since Coca Cola and PepsiCo have been in the market for many years thus very popular.
Labor supply and demand for the Coca Cola Company is affected by two main factors. The first factor is the wage factor whereby the supply of labor increases when the company increases its wage rates. Lower wages, on the other hand, will lead to more demand for labor since the firm is willing to hire more people at a lesser wage rate (Morgan, 2017). The second factor is the barrier to entry into the labor market. Coca Cola may require a specialized workforce for a particular position, and therefore the demand for labor will go up. However, the supply for labor will be reduced as a result of the restriction (Morgan, 2017). The hiring process may also decrease the supply if it is rigorous and time-consuming. The labor force will opt to consider other simpler employment options.
In conclusion, market structures refer to the characteristics of markets. Monopolistic competitions have numerous large businesses that own a fraction of the total market share. On the other hand, perfect competition is a market that has free entry of producers and consumers. Oligopoly is where small firms team up to control a large market share. Finally, monopoly refers to a market controlled by a single firm, which controls the prices and standards of products. The Coca Cola Company is a perfect example of oligopoly where a few firms control the beverage industry. Due to the financial barriers of entry, the market is dominated by a few producers.
Tucker, I. B. (2017). Economics for today (9th ed.). Boston, MA: Cengage Learning.
Morgan, L. (2017). Two factors that affect labor supply and demand. Biz Fluent. Retrieved from https://bizfluent.com/info-8454476-two-affect-labor-supply-demand.html
Schwartz, E., & Schwartz, E. (2013). An oligopoly like Coca-Cola uses product differentiation to compete. Retrieved from https://econlife.com/2013/11/an-oligopoly-like-coke-depends-on-product-differentiation/