Question

What is the relationship between payday loans and market structure?

Answer 1

Payday loan is a small amount of money lent at a higher rate of interest wherein both the parties agree that the loan would be repaid as soon as the borrower receives the next wage payment.

Market structure is defined as the characterstics of market wherein we focus on only those characterstics that affect the nature of competition and market.

Since there are minimal or no regulations for such loans these should be avoided as it drains out the capital from the market by charging higher rate of return from the borrower.