MARKET STRUCTURE:

MEANING,
CHARACTERISTICS AND
Presented
FORMS by:
IN ECONOMICS
Group 4
 OBJECTIVES:
After reading this module, the learners will
be
able to:
1. define market structure, know its
characteristics and forms in economics.
2. understand challenges faced by Filipino
entrepreneurs
 LET’S
UNDERSTAND
ORDINARILY, THE TERM “MARKET” REFERS TO A PARTICULAR
“MARKET”
PLACE
WHERE GOODS ARE PURCHASED AND SOLD.
“MARKET”
IN ECONOMICS, THE TERM “MARKET” DOES NOT MEAN A
PARTICULAR PLACE BUT THE WHOLE AREA WHERE THE BUYERS
AND SELLERS OF A
PRODUCT ARE SPREAD.
CHARACTERISTIC
S OF MARKET:
The essential features of a
market are:
1. AN AREA
In economics, a market does not
mean a particular place but the
whole region where sellers and
buyers of a product ate spread.
Modem modes of communication
BUT THE WHOLE
and transport have made the market REGION
area for a product very wide.
 2. ONE
COMMODITY
In economics, a market is not related to a place but to a particular A PA R T I C U L A R
PRODUCT
product. Hence, there are separate markets for various commodities.
For example, there are separate markets for clothes, grains, jewelry,
etc.
3. BUYERS AND SELLERS
The presence of buyers and sellers N Eis
C Enecessary
S S A R Y F O R for
T H Ethe
S A Lsale
E O F and
A
PRODUCT
purchase in the I N Tmarket.
H E M O D EIn
M the
A G E modem
, T H E P R age,
ESENC the
E Opresence
F B U Y E R S of
A Nbuyers
D
Nand
E C E Ssellers SELLERS IS NOT
S A RY is not necessary in the market because they can do
transactions of goods through letters, telephones, business
representatives, internet, etc.
 4. FREE
There should be free competition among buyers and sellers in the
COMPETITION
market. This competition is in relation to the price determination of a
product among buyers and sellers.

5. ONE
PRICE
The price of a product is the same in the market because of free
competition among buyers and sellers.
The market for a product refers to the whole region where buyers and
sellers of that product are spread and there is such free competition
that one price for the product prevails in the entire region.
 MARKET
Market structure refers to the nature and degree
ofSTRUCTURE:
competition in the market for goods and
services. The structures of market both for goods
market and service (factor) market are determined
by the nature of competition prevailing in a
particular market.
DETERMINANTS
There are a number of determinants of market structure
for a particular good.

THEY ARE:
1. The number and nature of sellers.
2. The number and nature of buyers.
3. The nature of the product.
4. The conditions of entry into and exit from the market.
5. Economies of scale.
LET’S
1. NUMBER AND NATURE OF SELLERS
1 . N U M B E R A N D N AT U R E O F
UNDERSTAND SELLERS
• THE MARKET STRUCTURES ARE INFLUENCED BY THE NUMBER AND NATURE OF
SELLERS IN THE MARKET.
• THEY RANGE FROM LARGE NUMBER OF SELLERS IN PERFECT COMPETITION TO A
SINGLE SELLER PUIN
R EPURE MONOPOLY, TO
I NTWO
D U OSELLERS
P O LY, IN DUOPOLY, TO A FEW
SELLERS INMOLIGOPOLY,
O N O P O LY,

2 . N U M B E R A N D N AT U R E O F
BUYERS
2. NUMBER AND NATURE OF BUYERS
• THE MARKET STRUCTURES ARE ALSO INFLUENCED BY THE NUMBER AND
NATURE OF BUYERS IN THE MARKET. BUYER’S
M
• OIFNTHERE
OPSONY
IS A SINGLE BUYER IN THE MARKET, THISM IS
O N O P O LY
BUYER’S MONOPOLY AND
IS CALLED
MONOPSONY MARKET.
3. NATURE OF
3 . N AT U R PRODUCT
E O F
PRODUCT
• IT IS THE NATURE OF PRODUCT THAT DETERMINES THE MARKET STRUCTURE.
• IF THERE IS PRODUCT DIFFERENTIATION, PRODUCTS ARE CLOSE
SUBSTITUTES, AND THE MARKET IS CHARACTERIZED BY MONOPOLISTIC
COMPETITION.
4 . E N T RY A N D E X I T
4. ENTRY C OAND
N D I TEXIT
I O N SCONDITIONS

• THE CONDITIONS FOR ENTRY AND EXIT OF FIRMS IN A MARKET DEPEND

UPON
5. ECONOMIES OF
PROFITABILITY
SCALE
OR LOSS IN A PARTICULAR MARKET PROFITS.

5. ECONOMIES OF SCALE
• FIRMS THAT ACHIEVE LARGE ECONOMIES OF SCALE IN PRODUCTION GROW
LARGE IN
COMPARISON TO OTHERS IN AN INDUSTRY.
 FORMS OF MARKET
STRUCTURE
• PERFECT COMPETITION MARKET
• MONOPOLY MARKET
• DUOPOLY
• OGLIPOLY
• MONOPOLISTIC COMPETITION
 PERFECT COMPETITION
A PERFECTLYMARKET
COMPETITIVE MARKET IS ONE IN WHICH THE
NUMBER OF BUYERS AND SELLERS IS VERY LARGE
ALL ENGAGED IN BUYING AND SELLING A HOMOGENEO
US PRODUCT WITHOUT ANY ARTIFICIAL RESTRICTIONS AN
POSSESSING PERFECT KNOWLEDGE OF MARKET AT A TIME.
IN THE WORDS OF A. KOUTSOYIANNIS,
“PERFECT COMPETITION”
ACCORDING TO R.G. LIPSEY, “PERFECT COMPETITION IS A
MARKET STRUCTURE IN WHICH ALL FIRMS IN AN INDUSTRY ARE
PRICE.
 CHARACTERISTICS OF PERFECT
• LARGE NUMBER COMPETITION
OF BUYERS AND SELLERS
• FREEDOM OF ENTRY OR EXIT OF FIRMS
• HOMOGENEOUS PRODUCT
• ABSENCE OF ARTIFICIAL RESTRICTIONS
• PROFIT MAXIMIZATION GOAL
• PERFECT MOBILITY OF GOODS AND FACTORS
• PERFECT KNOWLEDGE OF MARKET CONDITIONS
• ABSENCE OF TRANSPORT COSTS
• ABSENCE OF SELLING COSTS
 MONOPOLY
MARKET
MONOPOLY IS A MARKET SITUATION IN WHICH THERE IS
ONLY ONE SELLER OF A PRODUCT WITH BARRIERS TO
ENTRY OF OTHERS.
THE PRODUCT HAS NO CLOSE SUBSTITUTES.
 MONOPOLY MARKET
CHARACTERISTICS
➢ A MONOPOLY MAY BE INDIVIDUAL PROPRIETORSHIP OR PARTNERSHIP OR
JOINT
STOCK COMPANY OR A COOPERATIVE SOCIETY OR A GOVERNMENT
COMPANY.
➢ A MONOPOLIST HAS FULL CONTROL ON THE SUPPLY OF A PRODUCT.
HENCE, THE
ELASTICITY OF DEMAND FOR A MONOPOLIST’S PRODUCT IS ZERO.
➢ THERE IS NO CLOSE SUBSTITUTE OF A MONOPOLIST’S PRODUCT IN THE
MARKET.
➢ THERE ARE RESTRICTIONS ON THE ENTRY OF OTHER FIRMS IN THE AREA
OF
MONOPOLY PRODUCT.
➢ A MONOPOLIST CAN INFLUENCE THE PRICE OF A PRODUCT. HE IS A PRICE-
MAKER,
 MONOPOLY MARKET
CHARACTERISTICS
➢ PURE MONOPOLY IS NOT FOUND IN THE REAL WORLD.
➢ MONOPOLIST CANNOT DETERMINE BOTH THE PRICE
AND QUANTITY OF A PRODUCT SIMULTANEOUSLY.
➢ MONOPOLIST’S DEMAND CURVE SLOPES DOWNWARDS TO THE
RIGHT.
THAT IS WHY A MONOPOLIST CAN INCREASE HIS SALES ONLY BY
DECREASING THE PRICE OF HIS PRODUCT AND THEREBY
MAXIMIZE
HIS PROFIT
 DUOPOLY
DUOPOLY IS A SPECIAL CASE OF THE THEORY
OF
OLIGOPOLY IN WHICH THERE ARE ONLY TWO
SELLERS.
BOTH THE SELLERS ARE COMPLETELY
INDEPENDENT, AND NO AGREEMENT EXISTS
BETWEEN THEM.
 OGLIPOLY
• OLIGOPOLY IS A MARKET SITUATION IN WHICH THERE ARE A FEW FIRMS SELLING
HOMOGENEOUS OR DIFFERENTIATED PRODUCTS.
• AN OLIGOPOLY INDUSTRY
PRODUCES EITHER A HOMOGENEOUS PRODUCT OR HETEROGENEOUS
PRODUCTS.
• THE FORMER IS CALLED PURE OR PERFECT OLIGOPOLY AND THE LATTER IS
CALLED IMPERFECT OR DIFFERENTIATED OLIGOPOLY.
• PURE OLIGOPOLY IS FOUND PRIMARILY AMONG PRODUCERS OF SUCH
INDUSTRIAL
PRODUCTS AS ALUMINUM, CEMENT, COPPER, STEEL, ZINC, ETC.
• IMPERFECT OLIGOPOLY IS FOUND AMONG PRODUCERS OF SUCH
CONSUMER GOODS AS AUTOMOBILES, CIGARETTES, SOAPS AND DETERGENTS,
TVS,
RUBBER, TYRES, REFRIGERATORS, TYPEWRITERS, ETC.
 OGLIPOLY
• CHARACTERISTICS
INTERDEPENDENCE
• ADVERTISEMENTS
• COMPETITIONS
• BARRIERS TO ENTRY OF FIRMS
• LACK OF UNIFORMITY
• DEMAND CURVE
• UNIQUE PATTERN OF PRICING BEHAVIOR
 MONOPOLISTIC
COMPETITION
MONOPOLISTIC COMPETITION REFERS TO A
MARKET
SITUATION WHERE THERE ARE MANY FIRMS
SELLING A
DIFFERENTIATED PRODUCT.

“THERE IS COMPETITION, WHICH IS KEEN,

THOUGH NOT
PERFECT, AMONG MANY FIRMS
MAKING VERY SIMILAR PRODUCTS.”
 MONOPOLISTIC COMPETITION
CHARACTERISTICS
• LARGE NUMBER OF SELLERS
• PRODUCT DIFFERENTIATION
• FREEDOM OF ENTRY AND EXIT FIRMS
• NATURE AND DEMAND CURVE
• INTERDEPENDENT BEHAVIOR
• PRODUCT GROUPS
• SELLING COSTS
• NON-PRICE COMPETITION
 THE CHALLENGES FACED BY FILIPINO
ENTREPRENEURS
“IT IS WIDELY ACCEPTED THAT SMALL
S M A L L AND
A N D MEDIUM
MEDIUM
ENTERPRISES
ENTERPRISES
I M P O R T A N T PLAY
A N D AS VERY
I G N I FIMPORTANT
ICANT AND SIGNIFICANT ROLE
ROLE
IN THE ECONOMIC AND SOCIAL DEVELOPMENT OF A
COUNTRY”.
THIS IS AN ACKNOWLEDGMENT BY THE PHILIPPINE
(DTI)

GOVERNMENT
2004 - ITSELF, THROUGH THE DEPARTMENT OF TRADE
2010
AND INDUSTRY
SME (DTI) IN ITS
2004-2010S SME DEVELOPMENT PLAN.

INDEED, SMES (SMALL AND MEDIUM ENTERPRISES, WHICH

ALSO ENCOMPASSES MICRO ENTERPRISES) HAVE AN
OVERWHELMING PRESENCE IN THE PHILIPPINE ECONOMY.
 MONOPOLISTIC COMPETITION
MEDIUM IUM
ENTERPRISES,
CHARACTERISTICS
M E DENTERPRISES, AS DEFINED BY THE SMED
COUNCIL, ARE THOSE WITH TOTAL ASSETS (EXCLUDING LAND)
OF P15M TO
P100M, OR
SMALL
NOT LESS THAN 200 EMPLOYEES.
ENTERPRISES
SMALL ENTERPRISES ARE THOSE WITH TOTAL ASSETS
(EXCLUDING
MICRO
LAND) OF P3M TO P15M, WITH 10 TO 99
EMPLOYEES.
ENTERPRISES

MICRO ENTERPRISES ARE THOSE WITH TOTAL ASSETS

(EXCLUDING LAND) OF P3M OR LESS, WITH 1 TO 9 EMPLOYEES.
SMES,WHICH ALSO ACCOUNTS FOR 69.1% OF
E M P L OTHAT
THE REPORT INDICATES Y M E N IN
T 2001, OVER 99.7%
OF ALL
FIRMS ARE SMES,WHICH ALSO ACCOUNTS FOR 69.1% OF
EMPLOYMENT
SOME OF THE IDENTIFIED “CHALLENGES,” AN
ENTREPRENEURIALEUPHEMISM FOR
“PROBLEMS” OR ROADBLOCKS, INCLUDE:
• PRODUCTIVITY LIMITATIONS
• LIMITATIONS RELATED TO FUNDING
SOURCES
• INADEQUATE KNOWLEDGE ABOUT, AND
INACCESSIBILITY OF, MARKET
OPPORTUNITIES
THANK YOU