Market Dynamics: Demand, Supply, and Competition

Posted on Feb 2, 2025 in Economy

Market Dynamics

Market: A set of activities for the sale of a product made by sellers and buyers.

Demand

The quantity of goods which buyers are willing to purchase at a specified price.

Factors Influencing Demand

  • The price of the property concerned
  • The price of related goods (complementary, substitute)
  • Disposable income (inferior, normal, and luxury goods)
  • Consumer preferences

The demand curve is a graphical representation of the demand function, showing the quantities buyers are willing to buy at each price.

Supply

The amount of an asset that companies are willing to produce at a specified price.

Factors Influencing Supply

  • The price of the asset in question
  • The costs of production factors
  • Business objectives

Market Structures

Perfectly Competitive Market

All goods are exchanged voluntarily at the price set by the market. Characteristics include:

  • Many firms
  • No influence on price
  • No product differentiation
  • Strong competition
  • Full transparency
  • No barriers to entry or exit

Market Evolution

(Growth – Saturation – Stagnation – Stabilization)

Imperfectly Competitive Markets

Monopoly

Concentrated in a single company, with overall impact on price. Characteristics include:

  • No competition
  • Lack of transparency
  • Barriers to entry (exclusive access to resources, legal rights)

These companies maintain high prices, and antitrust laws exist to protect consumers.

Oligopoly

Few companies in a homogenous market with strong capital investment. Can operate:

  • Without collusion (competition through trade policies, price wars, price leadership)
  • With collusion (informal alliances to eliminate competition)

Monopolistic Competition

Many companies with some influence over price, product differentiation, and strong competition.

Barriers to Entry

(Cost advantage, product differentiation, capital investment) factors that prevent or hinder market entry.

Economic Factors

Revenue

Represents the value or price of a factor of production in a given period.

Usufruct

Remuneration paid to owners of natural resources, measuring their ability to bear fruit.

Salary

Remuneration for work performed by another person.

Employment Metrics

PET [Enable (employed-unemployed) and Inactive]

  • Ta = P / PET * 100
  • TP = p.desm / pa * 100
  • TO = PO / Pa * 100

Unemployment Classes

  • Cyclic (result of expansion or recession)
  • Seasonal (e.g., summer jobs)
  • Structural (excess of applicants or those who are not qualified)
  • Frictional (voluntary unemployment)

Market Failures and Economic Policy

Market Failure

A negative result when the market is not efficient.

Anticrisis Measures

(Aid to families, bonuses for companies hiring, automotive plans, export support, VAT repayment)

Externalities

Positive or negative consequences of economic activities affecting others.

Environmental Policy

(Introduction of thresholds, unitary taxation, pollution licenses)

Welfare State

An economic system characterized by the recognition of basic rights for the population.