The market economy is too ingrained into the current business structures and organization that it would be impossible to create a perfectly stable alternative. Even countries like China that has a hybrid economy are not a perfect practical alternative. Secondly, expected effects of market price and quantity based on three different scenarios were considered. The third subsection of the first section discussed income elasticity and how it varies based on the high necessity attribute of the product. Finally, the barriers to entry and how this associates with economies of scale are then presented.
The purpose of this assignment was to understand market economy and monopolies by a detailed discussion on the same. The first section will discuss the alternative to market economy, a case study involving demand supply curves, income elasticity concepts and also the entry barrier as applicable to competitive industries. The second section discusses the concept of monopoly and how governments have sought for different ways to end monopoly. The public monopoly as an alternative to private monopoly is discussed.
Logically speaking, when the price of fixed line calls falls sharply, people would no longer be interested in using the mobile phone or buying it. The demand for the mobile phone goes down in the market and so does the price. The market will be short with mobile phones. However, mobile phones being used now are smart phones and hence call pricing will not be the only reason that a user will prefer a fixed line versus a mobile phone.
In the second subsection, how governments work on monopolies to break them, and even try to make them public monopoly structure in order to induce a certain level of competition presented. Theory of market structures indicates that a perfect monopoly is not possible and at best, an oligopoly is what would be present in a market.