Understanding the Function of Markets Through Different...

Understanding the Function of Markets Through Different Theoretical Perspectives The aim of this essay is to answer the 2 parts of the provided question. In the first part I will discuss the different markets models and how those different models describe the way markets function. While the second part will discuss how and why markets are limited and failure cases happens. An example case of a market failure is to be provided to assist this part of the discussion, and for this purpose I chose the affect of SARS in the airline and tourism markets as an example. How the use of different theoretical perspectives can help us in understanding how markets function Markets are a mechanism which†¦show more content†¦Dynamic Competition: Schumpeters view of this model of competitive markets stands on the basis of competition over innovations in products and process and not price competition. So firms that do not move ahead faster than their competitors will fall behind and eventually will go out of business. This process of innovate or go bust is what Schumpeter calls creative destruction. The result of such creative destruction would be a regular changing structure of the economy and improving living standards over the years. According to Schumpeter we should not put too much emphasis on static efficiency related to perfect competition because this tends to kill technological change. Instead we should recognize that some degree of monopoly power is a necessity to keep going the process of infrastructure growth and development. The main features of this model are: - Short term monopolies are useful to enable firms to accumulate the required resources. - Large firms are important in the evolutionary procedure of the economy; and - Markets operate under this view achieve reduction in cost and improvement in quality which results from two sources:  · Technological advances  · Economies of scale. Some opposing argument would be that this model does allow a problem of monopoly, which governments need toShow MoreRelatedSociology and Coffee Essays881 Words   |  4 PagesWriting Assignment #1 Coffee is a beverage that is globally consumed, but also a product that has different values in different parts of the world. The role coffee plays in society differs around the world, from the farmers who grew the crops to the people who constantly consume them. Social theoretical perspectives are capable of showing the different roles coffee has in different societies. 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