How does market power disproportionately affect the poor?

Market power disproportionately affects the poor by making goods and services more expensive and less accessible.

Market power refers to the ability of a firm or group of firms to raise and maintain price above the level that would prevail under competition. This is often the result of monopolies or oligopolies, where a single company or a small number of companies dominate a particular market. When these firms exercise their market power, they can set prices higher than they would be in a competitive market, making goods and services more expensive.

The poor are disproportionately affected by this for several reasons. Firstly, they spend a larger proportion of their income on basic goods and services, such as food, housing and utilities. When prices for these goods and services increase due to market power, the poor are hit harder as they have less disposable income to absorb these price increases.

Secondly, market power can lead to less choice and lower quality goods and services. Firms with market power may have less incentive to innovate or improve their products, as they face less competition. This can result in poorer quality goods and services, which again disproportionately affects the poor, as they may not have the financial means to seek out better alternatives.

Thirdly, market power can lead to income inequality. The profits generated by firms with market power often go to shareholders and top executives, rather than being distributed more evenly throughout the economy. This can exacerbate income inequality, with the rich getting richer and the poor getting poorer.

Finally, market power can lead to a lack of access to essential services. In markets such as healthcare or utilities, firms with market power may choose to only serve more profitable areas or customers, leaving those in poorer areas without access to essential services.

In conclusion, market power can have a significant and disproportionate impact on the poor, making goods and services more expensive, reducing choice and quality, exacerbating income inequality, and limiting access to essential services.