CONTENTS OF THE TOPIC

• Market Structure

• Price and Output determination under different forms of market structure

MARKET STRUCTURE AND MARKET STRUCTURE AND PRICE DETERMINATIONPRICE DETERMINATION

SONU CHOWDHURY

WHAT IS

MARKET

a system

buyers

sellers

bargain

Concept of Market? A market is a system by which buyers

and sellers bargain for the price of the product, settle the price and transact their business.

The market may be in one specific placeor

not exist physically at all

Components of Market

Consumers

Sellers

Commodity

Price.

Concept of firm & industry• A firm is any business unit organized

under one ownership & management.

• An industry is a group of firms dealing in the same line of business.

• Sangam India Ltd is one of the firms of textile industry of India.

MARKET STRUCTUREMarket structure – identifies how a market is

made up in terms of:

Number of firms in the industryNature of the product producedDegree of competition a firm facesDegree to which the firm can influence priceProfit levelsThe extent of barriers to entryControl over price

Depending on the number of sellers & competition, the market structure is broadly

classified into:-

Perfect competitionImperfect competition

Monopolistic competition

Oligopoly competition

Monopolycompetition

1. PERFECT COMPETITION:- large number of firms with identical products

2. MONOPOLISTIC COMPETITION:- Many firms with product differentiation

3. OLIGOPOLY :- Little or no product differentiation

4. MONOPOLY :- A single producer without close substitute.

THE INDIAN RAILWAYS

A SABJI BAZAAR / VEGETABLE MARKET

ALLUMINIUM/STEEL INDUSTRY

BISCUIT INDUSTRY

1. PERFECT COMPETITIONA Perfect competition is characterized by:-

Buyers and sellers:- Large no. Product:- Homogeneous Entry and free exit of firms :- Free Knowledge :- Perfect Government intervention :- Free Perfect mobility of factors of production.Firms are price takers – have no control over the price they charge for their product

MONOPOLISTIC COMPETITION

“ Monopolistic competition refers to a situation where there are many sellers of

differentiated products. There is competition between many firms making similar products which are close though

not perfect substitutes.”

CHARACTERSTICS OF MONOPOLISTIC COMPETITION

1. Large no. of sellers – “Many and small enough”2. Product Differentiation

QualityAdvertisementPatentSize, Colour, Shape, Packaging etc

3. Free entry and free exit of firms4. Higher Elasticity of Demand.

OLIGOPOLY COMPETITION

“ 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 firms. .”

Derived from Greek word Oligoi (few) + Polein (to sell)

CHARACTERSTICS OF OLIGOPOLISTIC COMPETITION

1. Small number of large firms.2. Interdependence :- decision of one

influenced by decision of other.3. Existence of Price Rigidity4. Advertising.5. Oligopolies are price shapers or setters6. Product may be homogeneous (steel) or

differentiated (automobile).

Three big players, Cadbury, Nestle and Amul

COKE VS PEPSI