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Discuss the main factors that determine product prices in the UK.
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Discuss the main factors that determine product prices in the UK A factor that may affect product prices is the market structure of the industry. In theory there are two extreme forms of market structures and depending on the market structure the market price will be different. These two structures are perfect competition and pure monopoly. Firms in a perfectly competitive market are price takers, no one firm can affect market price. In the short run a firm can make abnormal profit. However in the long run, only normal profits can be earned due to free entry and exit. There is product homogeneity and a large amount of firms of about equal size. Firms in a competitive market who are profit maximisers produce where MC=MR but MR=AR and is also the price as demand is perfectly elastic In a monopolistic industry there is an assumption there is only one firm and...
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