about the project
Medical news
For authors
Licensed books on medicine
<< Previous Next >>

Economic boundaries of the industry and the factors that determine them

One of the first issues to be addressed in analyzing an industry is the question of its boundaries. What is included in this industry? This is not an easy task, as many industries are dynamic and develop very quickly. So, for example, in the 60s one could talk about the electronics industry, covering the entire range of goods manufactured in those years. Today

these are several new industries - consumer electronics manufacturing, com

computers, microprocessors, etc.

Fig. 1.

The approximate structure of the national economy

The economic boundaries of the industry, the number and concentration of enterprises included in its composition, the conditions for entry into the industry, the type of product are determined by an important external factor in the functioning of the industry - the market structure.

In various market structures, each of which has its own parameters and can be represented as a specific market model, various types of industries are formed.

As you know, there are four main market models: pure

(perfect) competition, pure monopoly, monopolistic competition and oligopoly.

Pure (perfect) competition - competition arising between enterprises selling the same goods. In this case, prices for goods are determined

the ratio of supply and demand.

It is necessary to distinguish between the concept of imperfect competition - competition in conditions when individual manufacturers have the ability to control prices for the products they produce. In a developed market economy, pure or perfect competition is extremely rare and is an abstract model. Imperfect competition is represented by industries of pure monopoly, monopolistic competition and oligopoly. With imperfect competition, entry into the market and exit from the market are difficult, and access to information is limited.

Pure monopoly is a type of industry market in which:

• one company sells a unique product that does not have a close substitute;

access to other manufacturers on the market is closed;

• the monopolist company has significant control over the price of the product sold.

With a pure monopoly, price competition is absent or limited.

Monopolistic competition is a type of industry market in which there are a fairly large number of firms selling differentiated products and exercising price control over the selling price of the goods they produce. Monopolistic competition implies relatively free access to the market.

The market of monopolistic competition is the market for a number of sellers and buyers who make transactions in a wide range of prices. There is significant non-price competition in such a market.

Oligopoly is a market model in which there are several sellers, the share of each of which is so large in total sales in the market that a change in the quantity of products offered by each seller leads to a change in price.

The types of industries corresponding to these models differ in:

? the number of enterprises that are part of the industry,

? type of product;

? terms of entry into the industry;

? price control features

and other factors determining the economic boundaries of the industry and the effectiveness of its functioning. For example, in a pure monopoly, when the company is the sole supplier of a homogeneous

goods, the economic boundaries of the company expand to the scale of the industry. The output of a monopoly company is compared with the output of the industry, while the demand curve for the products of the monopolist is a market demand curve for this product.

The industry of perfect competition includes many independent enterprises producing homogeneous and standardized products.
Entrance to the industry and exit from it is absolutely free, information is available to each enterprise. The share of each company is very small,

therefore, her decision to lower or raise the price does not affect the market price. There is no price control and the company “receives” the set price by the market and “agrees with it”.

Perfect competition and pure monopoly are two extreme cases of market structure. Both are extremely rare. Intermediate and much more realistic models of market structures are oligopoly and monopolistic competition.

The existence of the industry under monopolistic competition, when each seller’s product is differentiated, enough similarities can be found between different types of products to unite sellers into broad categories similar to the industry. A product group is a few closely related but not identical products that satisfy the same need of customers. In each product group, sellers can be considered as competing firms within the industry.

When describing the economic boundaries of the industry, it is necessary to evaluate the cross elasticity of demand for the goods of competing firms.

Cross demand elasticity is a form of demand elasticity in which a change in the price of one product leads to a change in demand for another (similar in its consumer qualities) product. A positive cross-elasticity means that the goods are interchangeable. The negative value of cross elasticity means that the goods are complementary.

The concept of cross-elasticity of demand allows us to measure how sensitive consumer demand for one product (say, X) is to a change in the price of some other product (say, Y). The formula of cross elasticity of demand represents the ratio of the percentage change in the volume of consumption of the product X to the percentage change in the price of the product Y:

If the coefficient of cross elasticity of demand has a positive value, that is, the quantity of products requested X varies in direct proportion to changes in the price of product Y, then products X and Y are interchangeable goods. For example, the rise (fall) in the price of oil (Y) forces consumers to buy more (less) margarine (X). The greater the positive coefficient, the greater the degree of interchangeability of these two products. If the coefficient of cross elasticity is negative, we can conclude that the products X and Y “come complete” and are complementary products. So, the increase (decrease) in the price of cameras will lead to a reduction (increase) in the number of films purchased. The greater the value of the negative coefficient, the greater the complementarity of the goods. Zero or almost zero coefficient indicates that the two products are not interconnected, or are independent goods. For example, one can hardly expect that a change in the price of oil will have any noticeable effect on the number of purchases of film.

In an industry with monopolistic competition, the cross elasticity of demand for products of rival firms should be positive and relatively large. This means that the products of competing firms are very good substitutes for each other, and if the firm raises the price above the competitive price, then it can expect a significant sales volume loss in favor of competitors.

The characteristics of market structures and their impact on the formation of the industry are shown in table 1.

Table 1 -

forms of market structures and their influence on the formation of industries

<< Previous Next >>
= Skip to textbook content =

Economic boundaries of the industry and the factors that determine them

  1. The economic boundaries of health and the factors that determine them
    It is extremely difficult to define clear boundaries of healthcare as one of the sectors of the country's economy due to the fact that many activities related to maintaining and promoting health do not relate directly to medicine, to professional medical activity, which forms the basis of healthcare as an industry. Therefore, by defining the economic boundaries of healthcare we will
  2. The concept, structure, economic boundaries of the industry. Place industry in the national economy
    The concept, structure, economic boundaries of the industry. Place industry in the national
  3. Concept, structure, economic boundaries of healthcare. The place of healthcare in the national economy.
    Concept, structure, economic boundaries of healthcare. Place of healthcare in the folk
  4. Prospects for the technical, economic and social development of the industry. Health Development Concept
    In the process of state regulation of the development of sectors of the national economy of the Russian Federation, individual measures, plans, programs are developed, as well as long-term development forecasts and concepts are laid down that determine the foundations of the strategic development of each industry. Reforming the links of the medical and social system requires the development of theoretical and methodological foundations,
  5. The size of the enterprise and the factors that determine it
    Of great importance for the viability and competitiveness of the enterprise is the determination of its size. It is necessary to distinguish between the concepts of "size of production" and "size of the enterprise." The size of the volume of production is always expressed by the quantity of products, the more products in physical terms the enterprise produces, the larger the size of production. Enterprise size is quantity
  6. Healthy lifestyle and its determining factors
    Man is the most complex and subtlest system; it is capable of self-healing. However, our lifestyle is often contrary to the needs of the body and harms it. I.P. Pavlov Factors affecting health. Health and lifestyle. Healthy lifestyle. Biological and passport age. The amount of health. It is known that a person and his health are affected by a huge
  7. Health and its determining factors
    It seems that everything is very simple - the doctor examined the patient, received objective (and subjective) results, compared with the "standard" and concluded: "You are healthy" or "You are sick." However, in reality, everything is extremely complicated. No wonder they say that "healing is an art." It depends not only on the deep and comprehensive knowledge of the doctor, but not least on his intuition. Doctor's judgment
    The main feature of coronary blood flow is its discontinuity, while in other organs it is continuous. During systole, the pressure inside the left ventricular myocardium reaches blood pressure. The force of LV contraction almost completely blocks the intramyocardial part of the coronary arteries; blood flow can change direction to the epicardium for a short time. In addition, even at the end of diastole, pressure in
    As you know, in psychology there is a widespread understanding of the psychological essence of personality as an “ensemble of relations” (L. I. Bozhovich, I. V. Dubrovina, E. V. Ilyenkov, V. N. Myasishchev, etc.). When the relation is meant, then in its content the connection between something and something, between something and someone and between someone and someone is thought. Moreover, in connection with something and someone, the second component of this connection is “burdened” with psychological
  11. General characteristics of industrial factors that determine working conditions in the production of drugs.
    1. The chemical factor. Studies show that the main unfavorable operating factor of the working environment at the enterprises of the chemical and pharmaceutical industry is the pollution of harmful workplace air, clothing, and skin with harmful organic and inorganic substances. Air pollution with toxic substances is possible at all stages of the process: when
    The behavior of consumers is affected, as already noted, by his environment: labor, training or military groups, family, public organizations and associations in which a real or potential buyer is involved. Sociologists call them reference groups. It is important for the marketer to know at least the main reference groups in this market, where he is going to work. Mechanism of influence
  13. Economics of enterprise location. The size of the enterprise and the factors that determine it
    Economics of enterprise location. The size of the enterprise and its factors
  14. The industry and the efficiency of the economy. Industry development prospects
    The industry and the efficiency of the economy. Development prospects
    Properties of the hydraulic system. The natural vibration frequency of each structure of a hydraulic system is inversely proportional to its mass. The lowest natural frequency of oscillations in the heart muscle, but this structure has a large mass. The highest frequency of natural oscillations in the lunar valves of the aorta and pulmonary artery, and their mass is the smallest. The oscillation frequency determines the pitch.
  16. The boundaries of the solar spectrum
    The spectrum of the Sun, reaching the boundaries of the Earth’s atmosphere, is from 0.1 to 60 microns. In the presence of water vapor in the atmosphere, it shortens to 2.2 microns. 1) Infrared rays (IR) - from 0.76 to 60 microns (in this area, measurement in microns is accepted); 2) Visible rays - 400-760 nm; 3) Ultraviolet rays (UV) - 10-400 nm. The flow characteristic is different in composition: UV visible IR at the atmospheric boundary 5% 52%
    Sanitary protection of the territory from the importation and spread of quarantine infections (quarantine diseases include: cholera, smallpox, plague, yellow fever) is one of the urgent tasks of Soviet health care due to the fact that the situation in the world over quarantine infections remains tense, and the Soviet Union constantly expanding economic, cultural and tourist relations with
  18. Borders
    The ability to see depends on knowledge; Knowledge is from school and from learning. But if you have reached an understanding, only the ability to see matters. Ernst Gombrich. "History of Art" In the Persian tales of Khoja Nasreddin great folk wisdom is enclosed. In one story, Nasruddin is desperate for something in the street dust, kneeling under a lamppost near his home. Happy neighbor coming out
Medical portal "MedguideBook" © 2014-2019