This is David´s 2nd six weeks economics project.
What are business organizations?
A business organization is an entity aimed at carrying on commercial enterprise by providing goods or services, to meet needs of the customers.
Some examples of business organizations (ownership) are: sole proprietorship, partnership, corporations...
What are market structures?
The market structures especially focus on those characteristics affecting competition and pricing.
Market structures are the interconnected characteristics of a market.
There are four types: perfect competition, monopolistic competition, monopoly, and oligopoly.
What is sole proprietorship?
The advantages of sole proprietorship are that the owner has absolute control over the firm, and that the owner receives all the profits so they are highly lucrative. Some disadvantages are that the owner is completely responsible for the debts of the company, or the difficulty in finding banks or people who will invest in your company.
The sole proprietorship refers to the fact that a company is owned by just one person.
In this project, we will talk about market structures and business organizations, and about why a sole proprietorship could be in a perfectly competitive industry
What is a perfect competitive industry (perfect competition)?
In perfect competition, there are many sellers and buyers and firms have no control over prices,there are no barriers to enter, both buyers and sellers are informed about products, and the products sold are identical.
Why a sole proprietorship could be in a perfectly competitive industry
Knowing all these concepts, I could say that a sole proprietorship could be in a perfect competitive industry as long as it responds to the signals sent by customers, who decide what to buy and in which quantity.
On the other hand, if we had to mention any drawbacks, I would like to point out the difficulties in finding investment for your company or the full responsibility of the owner. These may have a very damaging impact on the firm and drive it out of the market, as consumers will rapidly find a substitute good or service due to the market structure we are talking about.
This kind of business organization may be successful as in a pure competitive market, the owner of the firm only needs to decide how much quantity of a good or service to produce , the rest is already established by the market itself.