- 1. Prepared by: Namita Sharma
2. Market is a place where buyers and sellers appear to conduct
exchange transactions. The only requirement of a market is that all
potential buyers and sellers should be in close contact with each
other to conduct exchange transaction. According to Cournot :
Market is not any particular place in which things are bought or
sold, but the whole of any region in which buyers and sellers are
in such free interaction with each other that the prices of the
same goods tend to equality easily and quickly. Basic Features :
Buyers Sellers Interaction Existence of a commodity Price 3.
Market: Benham stated market as any area over which buyers and
sellers are in close touch with one another either directly or
through dealers , that the price obtained in one part of market
affects the price paid in other Stonier and Hague explains the term
market as'' any org whereby buyers and sellers of good r kept in
close contact with each otherthere is no need to for a market to be
in a single building the only essential for a market is that all
buyers and sellers should be in constant touch with each other ,
either because they r in the same building or because or they r
able to contact through telephone or internets. 4. Market
Classification On the basis of area On the basis of nature of
transaction On basis of volume of business On the basis of time On
the basis of status of seller On the basis of regulation 5. PERFECT
COMPETITION Definition of Perfect competition: A market in which
there are many small firms, all producing homogeneous goods. No
single firm has influence on the price of the product it sells. 6.
Perfect competition: A very large no of relatively small buyers and
sellers . All sellers sell homogenous products The firms are free
to enter or leave the market The firms in industry dont collude
with each other . The factors of production must be free to enter
or leave the industry. Each buyer and seller operates under the
condition od certainty. 7. 1. Pure/Perfect Competition Large number
of buyers and sellers Identical product Well informed buyers and
sellers More Competition Less Competition 8. Pure/Perfecct
Competition QuickTime and a TIFF (Uncompressed) decompressor are
needed to see this picture. Many buyer/sellers + Identical Products
9. Feature of Perfect competition Many buyers / Many sellers
Homogeneous Products Low-entry / exit barriers Perfect information
For both consumers and producers Firms aim to maximize 10. PERFECT
COMPETITION Advantages of perfect competition: High degree of
competition helps allocate resources to most efficient use Price =
marginal costs Competition encourages efficiency Firms operate at
maximum efficiency Consumers benefit: consumers charged a lower
price Responsive to consumer wishes: Change in demand, leads extra
supply 11. PERFECT COMPETITION Disadvantage of perfect competition:
The conditions for perfect competition are very strict, there are
few perfectly competitive markets Insufficient profits for
investment Lack of product variety Lack of competition over product
design and specification Unequal distribution of goods & income
Externalities e.g. Pollution 12. Price determination: Normal profit
( AC=AR) 13. Perfect Competition: Supernormal
Profit/abnormalProfit(ACAR) 15. MONOPOLY: The single firm producing
the product is in itself both the firm and industry. No rivalry or
direct competition Indirect rivalry may occur in form of the
existence of small substitutes They are price makers 16. Monopoly
Only one seller of a particular product Few monopolies 17. Monopoly
One seller dominates the market with no close substitutes More
Competition Less Competition 18. Monopoly Natural Monopoly -
efficient production by a single supplier San Diego Gas &
Electric 19. Monopoly Geographic Monopoly - small town 20. Monopoly
1. Technological Monopoly - new invention Patent: exclusive right
for 17 years The Segway PT is a two- wheeled, self-balancing,
battery-powered electric vehicle invented by Dean Kamen. It is
produced by Segway Inc. of New Hampshire, USA. The name Segway is a
homophone of the word segue, meaning smooth transition Segway 21.
Monopoly 1. Technological Monopoly - new invention Copyright:
lifetime + 50 years The National Football League is a professional
American football league that constitutes one of the four major
professional sports leagues in North America This telecast is
copyrighted by the NFL for the private use of our audience. Any
other use of this telecast or of any pictures, descriptions, or
accounts of the game without the NFLs consent, is prohibited. 22.
Monopoly 1. Government Monopoly - government owned businesses 23.
MONOPOLYS CHARACTERISTICS A single firm selling all output in a
market : it is a direct contrast to perfect competition. Unique
product: Barriers to Entry and Exit. Government license or
franchise Resource ownership Patent and copyrights High start- up
cost Decreasing average total cost Specialized information 24.
Indian railways: as Monopoly 25. ADVANTAGES OF MONOPOLY Import the
products and compete with foreign companies Complete freedom in
selecting prices or quantity No guarantee of profitability........
there is only one firm 26. DISADVANTAGES OF MONOPOLY The prices
charged even increase prices Reduce the quality of the products
Reduce the satisfaction of the customers Cause many disadvantages
for the employees of the company 27. Origin of monopoly : Patent
rights for products Gov. policies such as granting licenses or
imposing foreign trade restrictions. Ownership and control over
some strategic raw materials Exclusive knowledge of technology by
the firms. Size of the market can accommodate a single firm
Prevention of entries 28. Monopolistic competition It refers to the
situation where there are many sellers of differentiated products .
There is competition keen though not perfect, between many firms
making very similar products .since the product is differentiated
each seller can independently decide about his own price output
policies. FEATURES Many number of sellers Product differentiations
freedom of entry and exit 29. MONOPOLISTIC COMPETITION What is
Monopolistic Competition? Monopolistic Competition, also called
competitive market, where there are a large number of independent
firms which have a very small proportion of the market share 30.
MONOPOLISTIC COMPETITION Characteristics of Monopolistic
Competition There are many buyers and sellers. Products
differentiated. 31. MONOPOLISTIC COMPETITION There are few barriers
to entry and exit. Each firms may have a tiny monopoly. Firm has
some control over price. 32. MONOPOLISTIC COMPETITION Monopolistic
Competition and Perfect Competition. Monopolistic competitive firms
produce products that are not perfect substitutes or are at least
perceived to be different to all other brands products. Unlike in
perfect competition, the monopolistic competitive firm does not
produce at the lowest possible average total cost Perfect
competition is an economic model that describes a hypothetical
market form in which no producer or consumer has the market power
to influence prices. While monopolistic competition is inefficient,
perfect competition is the most efficient, with supply meeting
demand and production therefore matching this, so stock is not sat
in storage for prolonged periods or going to waste 33. Price
difference with in price range Increase elasticity of demand Price
war Gift articles Unfair methods 34. Price discrimination It is
said to exist when the same product is sold for different prices to
different buyers. Conditions for price dicr. Are: Difference in
price elastisities. Market segmentation Efficient separation of sub
markets Legal sanction for price discrimination Various brands Some
buyers are ignorant or lack mobility 35. Monopolistic Competition
Are these shampoos/conditioners different? Pantene $14.50 Frederic
Fekkai $54 36. Monopolistic Competition Are these products
different? Maybelline Sisley $4 $43 37. Monopolistic Competition
Same as pure competition except for product differentiat Gap Levis
Lucky 38. MONOPOLISTIC COMPETITION Monopolistic Competition
Examples: books, restaurants, grocery stores, shoes, clothing,
coffee, chocolate 39. MONOPOLISTIC COMPETITION 40. MONOPOLISTIC
COMPETITION 41. MONOPOLISTIC COMPETITION 42. MONOPOLISTIC
COMPETITION 43. Monopolistic Competition: Price Determination-
Normal Profit 44. Monopolistic Competition: Price Determination-
Abnormal Profit 45. Monopolistic Competition: Price Determination-
Loss 46. Oligopoly : Is a situation where a few large firms compete
against each other and there is an element of interdependence in
the decision making of these firmsfeatures of oligopoly are Small
number of large sellers Interdependence Existence of price rigidity
Presence of monopoly element Advertising Restriction to the entry
47. Oligopoly A few very large sellers dominate the industry
Oligopolists act independently by lowering prices soon after the
first seller announces the cut Collusion: formally agree to set
prices Engage in price wars More Competition Less Competition 48.
Oligopoly Ipod Zune 49. Oligopoly Few producers control supply and
price 50. Coca-Cola Classic Coca-Cola classic Sprite Dasani Barq's
Dannon Nestea Rockstar Evian Fanta Fresca Minute Maid Mr. Pibb
Powerade Seagrams Ginger Ale & Mixers TAB 51. Pepsi-co Aquafina
Pepsi Mountain Dew Sierra Mist Sobe Lipton Brisk Tea MUG Root Beer
Slice Gatorade Dole Juice Tropicana 52. Cadbury Canada Dry Clamato
Dr Pepper Hawaiian Punch Mott's Orangina Snapple 53. Toyota Toyota
Scion Lexus 54. Chrysler Chrysler Jeep Dodge 55. General Motors
Chevrolet Buick Pontiac GMC Saturn Hummer SAAB Cadillac 56.
Classifying oligopoly situation: On basis of product
differentiation: Entry of firm. Price leadership. Agreement between
the firms. 57. Kinds of Market Structure Types of Market Seller
Entry Barrie rs Seller Number Buyer Entry Barrier s Buyer Numbers
Product type Price Perfect Competition No Many No Many Homogeneous
Uniform Monopoly (Pure) Yes One No Many Homogeneous Uniform
Monopoly (Discriminating ) Yes One No Many Differentiated
Differentiated Monopsony No Many Yes One Homogeneous Lowest
possible price Monopolistic Competition No Many No Many
Differentiated Differentiated Oligopoly Yes Few No Many Homogeneous
or Differentiated High Duopoly Yes Two No Many Homogeneous or
Differentiated High 58. CONCLUSION Market Structure Seller Entry
Barriers Seller Number Buyer Entry Barriers Buyer Number Perfect
Competition No Many No Many Monopolistic competition No Many No
Many Oligopoly Yes Few No Many Oligopsony No Many Yes Few Monopoly
Yes One No Many Monopsony No Many Yes One
