3. Understand the behavior of organizations in their market environment
3.1 Explain how market structure determine the pricing and output decisions
The characteristics of a market, such as the quantity and comparative force of consumers and sellers and level of collusion among them, rank and forms of competition, extent of product differentiation, and ease of entry into and exit from the market is referred to as the Market Structure. http://www.businessdictionary.com/definition/market-structure.html
Market structure plays an vital part to conclude cost and production. Perfect Competition, Monopoly and are some of the different market structures.
A market structure that consists of diverse sellers of the same product then the firm’s price determination and the output decision relies upon the claim for their products. In a competitive market consumers actually determine the cost and firm take the output decisions as compared to the demand for the manufactured goods because every firm tries to initiate lower prices to their buyers to raise their market share.
It is the market structure where it has monopoly and is the only supplier and hence, cost determination and output decision lies by the firm since in a monopolistic market the firm is the price maker and they can charge whatever value they wish for and client is bound to pay that amount since he/she would not have the option to make the purchase elsewhere or at a lower price, The firm will produce with its full capacity because the they will be bound to fulfill the demand as a whole for their products, normally multinational firms operate in such market structures. (an example of monopoly in Pakistan in WAPDA)
A market structure where there are numerous sellers of the same products and so the vendors have a little control over the pricing since large sellers usually set an ongoing rate for their products i-e they all set the same cost for their products with the consumers having a choice who to buy from. Vendors selling their products at the same decided price however, have difference in the way they advertise their products and attract customers to purchase them. In oligopolistic market the firms take decision of output in the light of the demand from their customers towards their products.https://www.ukessays.com/essays/marketing/pricing-and-output-decisions-of-businesses-marketing-essay.php