Assumptions: Hugos Hats produces fashion lids for both male and female customers, price per wear £100. Trades as a Private Limited Company and started trade as an e- handicraft in 1995.
Market Structure is the degree of arguing the business faces. There argon four market structures as illustrated in figure 1.
Figure 1
Perfect competition is a theoretical model, it does not exist. It is simulated that there are many buyers and sellers, the goods being sold are homogeneous and there is perfect knowledge in the market.
Monopolistic competition is when goods are slightly variantiated in some way, every by advertising or branding or by local production.
Oligopoly is when a few providers dominate the market.
Monopoly is when matchless supplier dominates 25% or more of output.
The following are the important characteristics of Monopolistic competition in which Hugos Hats are competing:
There are kind of a large number of firms, as a result, Hugos hat has only a small share of the market and, therefore, its actions are unlikely to affect its rivals to any great extent.
There is freedom of entrée of new firms into the industry. If any firm wants to set up a business of making hats, it is free to do so.
Product Differentiation: Hugos Hats are producing hats and providing customer service that is in some way different from its rivals. The demand curve is downward sloping, i.e. elastic, as customers are presumptuousness more choice from different suppliers in the market.
Profits are maximised: In the short run, Hugos Hat are producing where fringy costs (change in total costs from one extra hat produced) equals marginal revenue (change in total revenue from selling one more hat).
Total cost equals total of variable costs and dogged costs.
Total revenue is quantity sold, Q multiplied by price, P.
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