Pick an industry, the one in which you work or the one in which you aspire to work. Using Sal's scheme for identifying the type of market, is the industry perfectly competitive; monopolistic competitive; an oligopoly; or a monopoly? Is the demand curve for the good or service relatively elastic, unitary elastic, or relatively inelastic?
One of the industries I wish to discuss is the supermarket industry in America. This type of industry is a perfectly competitive market because these companies stocks and sells homogenous products (Froeb et al., 2014). A company which is in a perfectly competitive market determines the price to charge its customers for their products depend on the market structure and forces of demand and supply at the time. For instance, if a company raises the price of its products by a small percentage, it will lose a lot of customers because many of the players in the market sell similar products but a lower price. Examples of the largest United States based supermarkets in the industry include Kroger, Costco, publix, Alberston, whole food market and Wegmans chain stores. The demand curve in this industry is relatively elastic. Generally, customers are price sensitive and more determined to save their money, most of them are willing to shop in store as it presents the best lowest price in the market. If a store increases its price, there is a possibility the demand for products will decline. Elastic industries are price sensitive, and a change will automatically affect the demand of product by a more significant variance.
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Now pick a firm within the industry. Is the firm's demand curve relatively elastic, unitary elastic, or relatively inelastic? How does elasticity affect the firm's control over its price?
The largest company in this industry is Kroger Groceries chain stores. This store is one of the best chain stores in the United States. Kroger offers the best price rate and sells its product at a relatively lower price to customers compared to its competitors. However, if the firm decides to increases the price of its product, the demand for its product will fall drastically. The demand curve of this company is relatively elastic because of the presence of substitutes for its products in its respective market. Due to the effect of elasticity the company management cannot raise prices anyhow since it will lose a lot of customers.
Reference
Froeb, L., McCann, B., Shor, M., & Ward, M. (2014). Managerial economics: A Problem Solving Approach (4th ed.). Boston, MA, United States: Cengage Learning
