Market power relates to the ability of sellers to affect prices, and arises because of barriers to entry.
In economics, market power refers back to the capacity of a firm to influence the price at which it sells a product or service by way of manipulating both the delivery or demand of the products or services to increase monetary earnings.
In other words, market power occurs if a firm no longer face a wonderfully elastic demand curve and can set its fee (P) above marginal price (MC) without losing revenue. This indicates that the significance of market strength is related to the space among P and MC at a company's income maximizing level of output. Such propensities contradict flawlessly aggressive markets, where market participants have no market power, P = MC, and companies earn zero monetary earnings.
Market contributors in perfectly competitive markets are consequently called 'price takers', whereas marketplace individuals that show off market power are referred to as 'rate makers' or 'fee setters'.
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