UGBA 101A Lecture Notes - Lecture 1: Marginal Cost, Market Power, Economic Equilibrium
2 Nov 2017
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In this online age, it is easier for consumers to gather more information about products and prices they are looking for; thus, customers would become pickier. It would become more difficult for a retailer to continue to sell overpriced goods because people would have more knowledge about their options. In order for a firm to adjust and cut their price down to compete with other firms, the price will drop closer to the products" actual marginal cost. The very small firms are thriving because they can sell a small niche undeserved market that large firms are not. Their market share expands because there are more people who purchase what it provides. On the other hand, it will incur too much costs for larger firms to specialize by providing a specific small market. If the business entrants can cater the specific niche markets, then it will be worth their while to enter because they will have very little direct competitors.
