Market Structure
What is a Market?
• Place where there are many buyers and sellers .
• Actively engaged in buying and selling acts.
• Contact through different means of communication like
letters, telephone etc.
• Thus, It does not mean a particular place but the entire
area where buyers and sellers of a commodity are in
close contact and they have one price of same
commodity.
Market Structure
What is Market Structure?
It is therefore understood as those characteristics of a
market that influence the behavior and results of the
firms working in that market.
According to J.C. Edwards, “ A market is that mechanism
by which buyers and sellers are bought together. It is not
necessarily a fixed place.”
Characteristics
• Area: A market does not mean a particular place but the
whole region where sellers and buyers of a product are spread.
Modern modes of communication and transport have made the
market area for a product very wide.
• Buyers & Sellers: For exchange at least 1 buyer and 1
seller are needed. In the modem age, the physical presence of
buyers and sellers is not necessary in the market because they
can do transactions of goods through letters, telephones,
internet, etc.
Characteristics
• One Commodity: A market is not related to a place
but to a particular product. Hence, there are separate markets
for various commodities.
• Free Competition: There should be free competition
among buyers and sellers in the market. It is in relation to the
price determination of a product among buyers and sellers.
• One Price: The price of the product is same in the market
because of free competition among buyers and sellers.
TYPES OF MARKET
STRUCTURE
• Perfect Competition
• Monopoly Competition
• Monopolistic Competition
• Oligopoly Competition
PERFECT COMPETITION
• It is such a market structure where there are
large numbers of sellers and buyers.
• Homogeneous product .
• The price of the product is determined by the
industry .
• One price prevails in the market and all the firms
sell the product at the prevailing price .
CHARACTERSTICS
• Large number of buyers and sellers
• Homogeneous product
• No barriers to entry
• Perfect knowledge of the market
• No transportation cost
• Perfect mobility of factors of production
OLY
• It is a market structure in which there is
only a single seller of the product .
• One firm has full control over the supply of
the product .
• Example : Indian Railways , Rajasthan State
Electricity Board etc.
CHARACTERSTICS
• Sole supplier of the product
• Large number of buyers
• No close substitutes
• One firm industry
• Varies from industry to industry
• Absence of entry
• Monopolist is price maker
MONOPOLISTIC
COMPETITION
• It is a mid-way between perfect
competition and monopoly .
• In this the number of buyers and
sellers is relatively low .
CHARACTERSTICS
• Large number of firms
• Product differentiation
• Freedom of entry and exit
• Non price competition
• Price policy
• Less mobility
• No perfect knowledge
• Selling cost
•
OLIGOPOLY
• It is a market structure in which there are few
sellers of a product selling identical or
differentiated products .
• If they are selling identical products, it’s a case
of Pure Oligopoly.
• If they are selling differentiated products, it’s a
case of Differentiated Oligopoly .
ISTICS
• Relatively small number of sellers
• Interdependence of the firms
• Price rigidity and price war
• Difficulty in entry and exit
• Selling Costs
• Indeterminateness of the demand curve
• Complex market structure
By-
Ifeoluwa Abidola
