Question

Microeconomics:

A large company that makes many household goods has begun to struggle. They are struggling to profit and now are beginning to lose control of what their pricing is. This company previously used to have great successes and dominated the industry for these goods. In the 21st century, the digital age gave way to new methods to purchase these goods, along with many smaller, more affordable startups selling the same goods. The development of these startups during the digital age has hurt the large company.

What microeconomic principles are at play here? Please discuss if appropriate monopoly, oligopoly, supply & demand curves, and any other basic microeconomic principles that may apply to this situation and explain how they apply.

Answer 1

The principle is that with the entry of new firms and the evolution of new technology, the manufacturing costs have fallen down and with which the supply increased. With the increase in supply and with the same demand, the price reduced and with this the goods became more affordable. Initially the company used to be a part of monopolized market but since with the advent of many new companies, it changed its route towards oligopoly and therefore, the company couldn't withstand on the whole.