Question

Pick a product or labor market that you can talk about. Be specific when answering the questions about your market.

Give an example of market that you buy or work in.How does the market work? How many buyers are there? How many sellers? Is there a middleman in this market? What is the role of the middleman? How is the middleman lowering the transaction costs for buyers and sellers? Is the middleman likely to be replaced or eliminated in your market? Explain why or why not.What is the product that is being sold? How are prices set? How is the quality/service set?Are there innovations? How do they happen?

Answer 1

The product is toothpaste. The market constitutes of some big sellers basically its an oligopoly with few differentiated products. The total numbers of buyers being the whole population is divided among few brands of the toothpaste producers. I usually bought it from the nearby departmental store. Yes, there does exist middleman in the market. This middleman is one who is supplying the product to these stores from the wholesale point of the product. This middleman, on one hand, is increasing the cost of the product for me or for the buyers while for the producers, he is lowering down their costs by providing his transportation to reach out to different stores. He is acquiring the product at the lower cost and after adding the transportation and his profit margin, finally selling it at higher prices to the stores which in return are further increasing this price by adding their profit margins to finally arriving at the product price I purchase for. Yes, the middleman can be eliminated if the company itself would supply its product directly to stores. though it would be difficult plus costlier for the producers to manage the whole country at the same time. For this product which forms a small part of the budget, it is fine to have the middleman for the efficient working of the channel between stores and the manufacturing plant. The product being the part of oligopoly; the price is usually interdependent with the prices of the rival brands. Though there can be a little difference in the pricing of different brands merely on the basis of differentiation, setting it quite higher would reduce down its market share and would make its consumers switch over to other brands. Being a necessity or say being a good which itself is a very small part of the budget, the company usually does not provide services as such. Although the feedback of the consumers is quite useful for them for introducing a new product or for making the needed changed in the given product. Any changes or the introduction of new product passes through a series of tests to ensure that the product passes the standard tests before it could reach out to consumers eventually.