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Analyzing the Market Structure and Economic Dynamics of Easy Living Foods' Low-Calorie Microwavable Products

A market structure analysis focusing on the competitive landscape of low-calorie foods.

Ethan Howard
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Easy Living FoodsCourse name:Course no.Date:Instructor’s name:Analyzethe market structure for Easy Living Foods' low-calorie microwavable products, usingthe provided demand function and regression results. Discuss why the market is bestcharacterized as monopolistically competitive rather than perfectly competitive or monopolistic.Include an evaluation of the role of advertising elasticity, product differentiation, and marketpower. Explain the short-run and long-run equilibrium conditions for a monopolisticallycompetitive firm, and assess how the market might evolve if demand for low-caloriemicrowavable food continues to grow. Support your analysis with relevant economic theories,mathematical calculations, and diagrams.Word Count Requirement:2000–2500 words.

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From theassignment provided,we can see that a regression has been run to estimate thedemand function for low-calorie microwavable food. The regression equation derivedis–QD = 20,000-10P + 1500A + 5PX + 10 I1)Since R2is considerable high, the model explains the demand quite well.Theadvertisement elasticity calculated is 0.73 which meansthat advertisement plays animportant role in determining the demand. Since advertisement has no role to play ina perfectly competitive market, we can rule out the possibility of the market beingperfectly competitive. The market is also not a monopoly. This is because evenmonopoly doesn’t require advertisement expenditure.The demand function alsodepends on the price of another product “X” which is in competition with the productdiscussed.Thiscompletely rules out the possibility that the market is a monopoly.Therefore the market iseither an oligopoly market or a monopolistically competitivemarket. We know that advertisement plays an important role in a monopolisticallycompetitive market.In an oligopoly market, advertisement is not no important.Besides this, another salient feature of a monopolistically competitive market isproduct differentiation. In our example, there are several firms producing low caloriemicrowavable foods. But each of the firms practices product differentiation. Theyslightly differentiate their product from their competitors to highlight their ownproduct and thereby increase the market share. Therefore this firm is an example of amonopolistically competitive market.In the short run a monopolistic competitive firm can earnsupernormalprofits, canoperate at break even, orcan evenincur losses.If we assumethat a monopolistic competitive
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