Economics Essay Example | Topics and Well Written Essays - 250 words

Economics - Essay Example In an oligopoly market structure there are a limited number of firms operating in the marketplace. In the market structure in which Ford operates the barriers of entry are high (Amosweb, 2011). This is one of the reasons why there are a limited number of participants in the auto industry. One of the major barriers of entry is capital. It takes billions of dollars to create the infrastructure necessary to become an auto maker. The learning curve to become efficient at producing cars is long, thus experience is extremely important. The price elasticity of demand in the auto industry is medium. Customers care about price, but there are lots of other features that add value such as reliability, warranty, luxury, and performance which ultimately determine the price point of the automobile. A strategy Ford has used in the last couple of years is introducing hybrid vehicle models. One of its best selling models is the Ford Fusion Hybrid. The economic profits in an oligopoly market structure depend on the other players (Answers, 2011). For example when one company has clearance sales, other firms follow and implement similar strategies. Players in oligopoly markets such as Ford have power over their suppliers. References Amosweb.com (2011). Oligopoly and Monopolistic Competition. Retrieved March 7, 2011 from http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=oligopoly+and+monopolistic+competition Annual Report: Ford Motor (2009).