It is important for economist to studying the relation and interaction of production and prices of various goods in order to make viable focus. However understanding the general economy of the country or nation is equally important. This overall (general) study is known as macroeconomics. According to Wessels (2006), Macroeconomics is the study of the whole economy, including the study of inflation, unemployment, economic growth, and business cycle (p. 100). Instead of focusing on the behavior and interaction of individual units making up the economy, as we do in microeconomics, looks at the economy as an aggregate (p. 16). In my process of establishing a company, I have two industries on which I have to decide which one I will invest on. In order to come up with certain option I need to understand the concentration ratio, which refers to the means of measuring the concentration of market held by a particular suppliers in a market as explained in The New York Times Company,( 2010 )..
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The first one is energy industry which has 20 firms and concentration Ratio of 30%. This industry has distinctive characteristics which includes; intensive and technologically sophisticated projects, unregulated price, commodity volatility etc. The concentration ration in energy industry indicates that, it indicates there is still great potential in this industry which has not been exploited.
The second industry is the real estate which has 20 firms and concentration ratio of 80%. This industry can be divided into three groups which includes; Commercial, Residential, and agricultural. Real estate has the following characteristics; Durability, Heterogeneous, High Transaction costs, Long time delays, immobility among others. Real estate industry has high concentration ratio than energy industry because it is easy to invest in and thus it comprise of many small firms unlike in the energy industry.
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