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7/28/2019 Market Structurenncxzcxzczxcmzxmcm,.zx,.cm,.zx.c,x.zmc.zxm.mc,.zxm.cm.zxcm,zx.,c.mzx,.mc,.mzx,.mc,.zx,.cm,.xm,.c,.zm,.cm,.zxcxz,.c,xzc,.x,.cmzx,.mc,.zxm,.cm,.zx,.
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Meaning of Market
In common language, the term market
refers to a place, where goods are
purchases and sold, such as Super
Bazaar, Connaught Place.The term market should not ignore the
demand and supply of the commodities.
It may be local, national and international
such as Foreign exchange market.
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Markets on the basis of Competition
According to modern economists,
there can be markets
Perfect Competition
Zero Competition i.e Monopoly
Imperfect Competition
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Market Structure
Market Structure means layout of themarket from which firm purchases its inputs
and where it sells its output.
The classification of market structures is
based upon the following elements :The number of firms producing the product
The nature of product produced by the
firmsPrice elasticity of the demand of the
product produced by the firm
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Forms of
market
structure
Number of
firms
Nature of
Product
Status of
entry into
industry
Price
elasticity of
demand
Perfect
Competition
Large
number of
sellers
Homogeneo
us Product
Free entry
and exit
Infinite
Monopoly One No close
substitute
Strong
barriers to
entry
Very small
Monopolistic
competition
Fairly large
number of
firms
Close
substitute
products
Free entry
and exit
High
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Meaning of Perfect competition
Perfect Competition is a market situation in
which there is large number of buyers and
sellers of a homogeneous product, and the
price of such a product is determined bythe market forces of demand and supply.
IN other words, in perfect competition the
golden principle ofone market, one price
operates completely and continuously.
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Definition
In the words of Bilas, the perfect
competition is characterized by the
presence of many firms. They all sell
same product. The seller is a price-taker.
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Features of perfect competition
Large number of sellers and buyers
Homogeneous product
Free entry and exit of firmsPerfect knowledge of the market
Lack of Selling Costs
Same Price
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Price Determination under Perfect Competition
Price Demand for
Good x
Supply of
Good x
5 20 100
4 40 80
3 60 60
2 80 40
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Monopolistic Competition
Imperfect competition, is the actual marketwhich we encounter in our daily life.
Of all kinds of imperfect competition, themost important one is monopolistic
competition.Monopolistic Competition may bedescribed as a combination of both perfectcompetition and monopoly or blending of
the two.It refers to that market situation in whichlarge number of producers produce goodswhich are close substitutes of each other.
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Definition
According to J.S.Bain, Monopolistic
Competition is found in the industry
where there is large number of small
sellers, selling differentiated but closesubstitute products.
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Features of Monopolistic
Competition :
Large number of firms
Product Differentiation
Free entry and exit of firmsSelling Costs
Sales Techniques
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What is Monopoly ?
The word Monopoly is composed of
two words : (i) Mono-which means
single (ii) Poly- which means seller
Thus, monopoly is a market situation
in which there is a single seller of a
good with no close substitutes.
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Features or Necessary conditions
for the existence of Monopoly
One Seller and Large number of
Buyers
No close substitutes
Restriction on the Entry of New firms
Selling Costs
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Price Discrimination or
Discriminating Monopoly
Sometimes a monopolist charges
different prices of the same product
from different buyers.
The price policy of the monopolist is
called price discrimination.
The monopolist practising is called
discriminating monopoly.
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Definition
In the words of J.S.Bain, Price
Discr im ination refers str ict ly to the
pract ice by a seller o f charging o f
di f ferent pr ices from dif ferent
buyers for the same goods.
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Kinds of Price Discrimination:
Personal Price discrimination
Price Discrimination according to Use
Price Discrimination according toTime
Geographical Price Discrimination
Price Discrimination is also related toAge, Gender, Status of the
Customers
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Conditions of Price Discrimination
Existence of Monopoly
Difference in the elasticity of demand
Goods made to orderLegal Sanction
Behaviour of the consumers
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SELLING COSTS
In order to sell their products, firms
under monopolistic competition have
to spend a lot on advertisement and
publicity.
In Economics, the total amount of
money spent on advertisement and
publicity for pushing the sale of theproduct is called selling cost.
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Selling costs refer to those costs
which are incurred to increase the
sale of the product e.g. expenditureon advertisement, publicity,
commission to retailers, gifts and
concessions to customers etc.Definition
Sel l ing costs include al l
expenses incurred to increase
the demand for the goods .
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Assumptions:
Selling costs are based on two
assumptions :
Buyers taste and demand can be
changed
Buyers do not have full knowledge
about the various types of product.
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Shape of the Selling Costs
According to Chamberlin, selling costs curvesare also U-shaped.
Initially it falls and later it rises.
It means, in the beginning proportionate increase
in sales is more than the increase in selling costs.But after a point, proportionate increase in sales isless than increase in selling costs.
It implies that upto a point selling cost go on
diminishing but after a point the same tend toincrease.
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MEANING OF OLIGOPOLY
The term Oligopoly is derived from twoGreek words.
Oligoi means few and Pollen means to
sell.Oligopoly is an imperfect market wherethere are a few sellers in the market,producing either identical products or
producing products which are close but notperfect substitutes of each other.
For Example, Steel, tyres, automobiles etc.
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Main Features of Oligopoly :
A few sellers
Lack of Uniformity
Homogeneous of DifferentiatedProduct
Existence of Price Rigidity
Existence of Non-Profit Motive
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CLASSIFICATION OF OLIGOPOLY
The Oligopoly may be classified on
the following basis :
On the basis of Product Differentiation
Perfect or Imperfect Oligopoly
On the basis of Entry of Firms Open
or Closed Oligopoly