Essay Sample on Aggregate Demand and Supply

Introduction

A market is defined as a place where people regularly gather for the sale of provisions, purchase of livestock and other commodities (Dewenter et al., 2017, p 176). Aggregate demand is defined as the total financial measurement of total produced goods and services manufactured in any economy. Aggregate demand can also be referred to as the ultimate domestic demand, stating the number of goods and services to be procured at potential value levels (Rao, 2016). Different types of markets are classified according to the varying sellers and buyers in a relationship.

Different Types of Economic Markets

Oligopsony

This is one type of economic market. The word originated from the ancient Oligo which means 'few' and Osponia which means 'purchase'. This is a market form where the number of buyers is smaller compared to the number of sellers which is large. In the Oligopsony market type, various sellers compete with each other to trade their goods to a limited number of buyers (Bonanno et al., 2018, p 14). Internationally, the same buyers appear to be powerful and act as the overall dictator to the seller. There occurs an imperfect competition in this market where there are a smaller number of plaintiffs who have total control and have the power over different products in the market.

The main beneficiary in this type of market is the buyers, who play an intermediary function, unlike the producers who are the most affected once the situation gets worse. The main reason is that they don't get reasonable prices for the products they manufacture. In Oligopsony, there are few demanders compared to the suppliers who are the majority. Examples of Oligopsony are Cinemas were the people responsible for manufacturing the types of screens used there have decreased the number of buyers. Another practical example is submarine manufacturers. It is strictly partial to the military and armies of various countries. The clients in this field are not on a large scale.

Characteristics of Oligopsony Market

The diverse firms that comprise the oligopsony are interdependent. This means that the decisions and policies are acquired from one of the firms that are also a part of it. These contribute to a series of straight consequences on the other companies.

Oligopsony is developed within an outline of an inadequate competitive market, where it is visible that the buyers are the key personnel exercising the total power above the conditions that are offered by the market.

In Oligopsony, the plaintiff firms ensure that they get extraordinary profits at all times and ensure that these profits do not draw competition in their market. The prices of products prices are influenced due to the low numbers of buyers. In this type of market, the kind of products is commonly homogeneous.

The percentage of buyers here is regarded to be small in each of the products or services offered.

Disadvantages of Oligopsony Market Type

There is little or no competition on the part of demand. The effect of the same is absolute within a similar market.

In oligopsony, there are higher chances of having the ability to acquire the measure of goods preferred at the prevalent price with no exertion of any type of influence on prices already established.

One of the greatest advantages of oligopsony is that there is no essence of hiring a large number of staff.

Disadvantages

In the Oligopsony market type, the goods, products, and services must be reformed to buyers' demands in relation to quantity and price.

The product sellers have no ability to impose any environments on their products and services.

If there are a single plaintiff and a large number of bidders, there is a possibility of producing extreme situations of shortages.

It results in a loss of efficiency since it decreases the surplus of manufacturers without the ability to compensate.

Oligopoly

This is a market type that is entirely opposite of oligopsony. It is derived from the Greek word oligo meaning 'few' and pole which means 'sell'. This market is highly dominated by having a small number of sellers who are referred to as (oligopolists)

Characteristics of Oligopoly Market

In the Oligopoly market type, there are two types of goods namely;

Homogeneous goods are referred to as raw materials used in the production of products.

Differentiated goods are goods that are processed products.

They mostly use dumpling, which is the lowering of prices below the production cost. This means that oligopolies don't have competition.

There are no competition participants for the oligopoly since they have entire dominance and control of the market.

Oligopoly prevents the admission of new firms into their circle.

Advantages of Oligopoly

There is better performance on the internal workings of a firm.

Firms benefit from having tranquility and greater liberty to advance their products and services, once there is a competitive advantage and legal safety in a given area.

There are higher salaries for the members since there is no alteration of products and there is no reduction in the product prices.

The products purchased by the clients from an oligopoly improve daily and adjust to people altering their tastes.

Disadvantages

The vendor's actions affect other sellers.

There are high production costs and low quality in the majority of the products and services.

Firms established or evolving around oligopolistic business experience a lot of restrictions in their activity.

Monopoly

This is a type of market structure that has one provider of a particular service or goods. In economics, this is a form of imperfect competition. A single seller or producer has total control.

Characteristics of Monopoly market type

Monopoly has access to various kinds of expert information and uses it only for the company.

Monopoly has rigid obstacles to market entry.

Businessman practicing these market type have the absolute ability to fix product prices as he wishes.

Advantages

The ability to eliminate excesses of capacity in firms and avoid disproportionately.

Products can be generated on large scale increasing the performances of different innovations.

The firm's production costs are condensed.

Disadvantages

The affection of the management since there is no rivalry.

It leads to consumer exploitation by restricting the production of various goods, obliging consumers to pay higher in the purchase.

The small producers and poor people are mostly affected by unfair competition since they can't compete with larger firms.

Monopsony

In the field of economics, monopsony is referred to as the 'buyer's monopoly. It is derived from a Greek word mono meaning 'unique' and podiums meaning 'purchase'. In this market type, there is only a single buyer (Dube et al., 2018)

Characteristics of Monopsony

It is a market classified as imperfect and full of challenges between sellers and buyers.

This is a market structure having a single buyer and plaintiff.

It has a variety of bidders making purchase offers.

Advantages of Monopsony

The demands, needs, and prices are dictated and controlled by the buyer.

The larger the elasticity in the supply, the less volume it has to influence the product value.

Disadvantages

Monopsony produces inefficiency in the market due to the demand quantity and prices below equilibrium in an impeccably competitive market.

The Monopsonist kind occurs only in small native markets.

In a monopsony market type, an individual can purchase as much produce as they wish at the

Predominant price, without the ability to influence it.

Factors Affecting Aggregate Demand

Real balances. When there is an increase in inflation, there is a decrease in real spending as the monetary value decreases. Interest rate outcome is another factor affecting aggregate demand. When there is an increase in inflation, nominal interest has an increase for it to maintain the real interest rates. The net export effect is another factor affecting aggregate demand whereby there is an increase in domestic prices, there is an increase in demand for imports, and a decrease in exports (Cooper et al., 2018).

Factors Affecting Aggregate Supply

Variations in expectations for an increase. In cases where the suppliers wish to sell/her goods highly in the future, there occurs a less urge to sell in the present time. This will, therefore, shift the Short Run Aggregate Supply to the left. Changes in the resource price are another factor affecting aggregate supply. Variations in the short-run supply prices alter the Short Run Aggregate Supply curve. This does not affect the Long-Run Aggregate Supply.

Conclusion

In conclusion, these are some of the factors affecting aggregate demand and aggregate supply. Moreover, the types of economic markets are also in the paper.

References

Bonanno, A., Russo, C. and Menapace, L., 2018. Market power and bargaining in agrifood markets: A review of emerging topics and tools. Agribusiness, 34(1), pp.6-23.

Cooper, R., Hartley, K., and Harvey, C.R.M., 2018. Export performance and the pressure of demand: a study of firms. Routledge

Dewenter, R., Heimeshoff, U. and Low, F., 2017. Market definition of platform markets (No. 176). Diskussionspapier

Dube, A., Jacobs, J., Naidu, S., and Suri, S., 2018. Monopsony in online labor markets (No. w24416). National Bureau of Economic Research.

Rao, B.B. ed., 2016. Aggregate demand and supply: a critique of orthodox macroeconomic modeling. Springer.