Market Structures and Income Distribution

Posted on Feb 26, 2025 in Economy

Market Structures

The structure of remarketing refers to the number of companies in an industry.

  • A monopolistic market is where a single firm produces the entire range of a given good.
  • A perfectly competitive market is one in which there are many buyers and many sellers, regulated by the law of supply and demand. There is homogeneity; there is no difference between the product sold by one supplier and another.
  • An imperfectly competitive market exists when companies comprising it have the ability to influence the market price by acting individually.

Monopoly

A monopoly is where there is a single offeror who is able to determine the price. Causes that explain the appearance of a monopoly:

  • The exclusive control of a factor for a company’s product.
  • The grant of a patent (pay for registering a product).
  • The state control of the supply of certain services at state monopolies.
  • The existence of a large market and a peculiar structure in the industry may give rise to a natural monopoly.

A natural monopoly is one company whose average cost per unit of production decreases indefinitely. Maximum profit is achieved when Marginal Revenue (MR) equals Marginal Cost (MC).

Oligopolistic Markets

Oligopolistic markets are characterized by the existence of a small number of bidders who exercise control over the price and are mutually independent.

Monopolistic Competition

Monopolistic competition is when many companies sell similar products, but not identical. A market of clienteles is a set of goods that satisfy the same type of need in a differentiated way. The key facts of monopolistic competition are:

  • The market is automated, consisting of many businesses.
  • The goods produced by all firms are differentiated by brand or quality.
  • Each company has limited power to price the product.
  • There are no barriers to entry and industry output.

Income

Income is the total income received by owners of factors of production. Income distribution is how income is distributed among the owners of factors of production as wages, rents, interest, and benefits.

The Wage Gap

The wage gap: when these are acute, the result will be a less egalitarian distribution of income.

Sharing the Wealth

Sharing the wealth: The lower the percentage of the population with access to the wealth of a country, the greater the income disparities within the society. The wealth of a country is the net value of tangible or physical assets and financial assets.

Demand for Labor

Demand for labor is the number of people who are willing to be recruited by businesses at each salary level. The money wage (W) is the set of income of workers in cash or in kind, for the provision of their labor services employed. The real wage (W) equals the money wage divided by the price level (P). The market supply curve is the total number of people willing to work for each level of wages.

Minimum Wage

Minimum wage: if the wage is fixed above the equilibrium, there is an appearance of excess labor supply. Workers, brought together by unions, have market power and can set wages above the level of equilibrium, causing unemployment.

Activity Rate = (Economically Active Population / Total Population) x 100

Unemployment Rate = (Unemployed / Active Population) x 100

Employment Rate = (Employed / Population of Working Age) x 100

Human Capital

Human capital accumulation is investment in people, mainly in the form of education and training at work. Compensating differences are the salary differences to compensate for the non-monetary characteristics of different jobs.

Interest and Rent

Interest can be defined as payment for capital services or the price of a loan. Land price is often called rent. This reflects the value of its productivity.

Unemployment Rates by Cause

  1. Seasonal unemployment: it appears at the end of the work carried out at certain times of the year.
  2. Structural Unemployment: is what appears when there is a mismatch between the supply of labor and the demand for labor by entrepreneurs.
  3. Frictional unemployment: Is that which occurs when a person leaves their job to seek another or decides to return to the workforce.
  4. Cyclical Unemployment: Appears where the demand for labor is less than the supply in times of economic crisis.