Microeconomics Research Proposal Example | Topics and Well Written Essays - 1750 words - 1

Microeconomics - Research Proposal Example Microeconomics covers a rather broad area: demand and supply, indifference curve analysis, elasticity of supply and demand, production and cost, marginal analysis, market structure, pricing, and so on. This study will attempt to deal with the area of market structure which is very interesting because of its pervasiveness in our lives: Perfect competition, monopoly, monopolistic competition, and oligopoly. An understanding of market structure is essential not only for economists but also for individual businessmen and corporations, for it will help them greatly in dealing with numerous problems encountered in the competitive arena of business. The four major market structures often discussed by economists are perfect competition, which is production by numerous firms with identical/homogeneous products as well as the presence of conditions of free entry and exit; monopoly, which is production by a single firm; monopolistic competition, which is production by many firms with somewhat different or differentiated products; and oligopoly, which is production by several firms. Perfect competition is the ideal market condition envisioned by the great economist Adam Smith, and is often studied first because it is the easiest to understand and it can serve as starting point as well as a gauge by which to measure the performance of the other market structures. The demand curve of a perfectly competitive firm is horizontal because its output is but a small part of total production and it cannot affect the price. The conditions for perfect competition are: a) a large number of small firms and customers, b) homogeneity of product, c) freedom of entry and exit, and d) perfect information about available products and their prices. Many farming and fishing industries closely approximate perfect competition. At the other end of the spectrum is the