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S E21: Market Power - Why businesses charge more

Think Like An Economist

CHAPTER

Most Businesses Have Some Market Power

If you have some market power, you can raise prices a bit. So in our early example with the late night corner store, they can charge a little more for beer. They'll probably lose some business to stores which charge less money but aren't open all night. Disorganized hosts of successful parties are still going to buy their price or beer. And having some market power allows you to set a price that's higher than your marginal cost. If we don't have perfect competition, i'm guessing we have imperfect competition.

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