Market Structure
9 likes1,493 views
The document discusses various market structures including perfect competition, monopolistic competition, oligopoly, duopoly, and monopoly, outlining their characteristics and implications on pricing and competition. Key determinants of market structure include the degree of competition, nature of the product, and barriers to entry. Each structure influences the control firms have over price and their market strategies, with perfect competition having no control and monopoly having full control over supply and price.
Market Structure
- 1. Market Structure Perfect Competitions, Imperfect- Monopolistic, Oligopoly, Duopoly, UnitāII Perfect Competitions, Imperfect- Monopolistic, Oligopoly, Duopoly, Sorbent features of price determination and various market conditions. 9/27/2016 1NHU 501 Dr N R Kidwai, JIT Barabanki
- 2. 9/27/2016 2NHU 501 Dr N R Kidwai, JIT Barabanki Market: Market is space (geographical / virtual) where buyers and sellers meet and economic transaction (transfer of goods/ services in lieu of money) Industry: Industry consists of large number of independent firms having production units, producing homogeneous or similar products
- 3. Market Structure 9/27/2016 3NHU 501 Dr N R Kidwai, JIT Barabanki Determinants of market structure are ā¢ Degree of competition ā¢ Freedom of entry and exit ā¢ Nature of the product ā homogenous (identical), differentiated? ā¢ Control over supply/output ā¢ Control over price ā¢ Barriers to entry
- 4. Market Structure 9/27/2016 4NHU 501 Dr N R Kidwai, JIT Barabanki Market structure is defined on the basis of degree of competition in the industry ā¢ Perfect Competition ā¢ Monopolistic Competition ā¢ Oligopoly ā¢ Monopoly
- 5. Perfect Competition 9/27/2016 5NHU 501 Dr N R Kidwai, JIT Barabanki ļ§ Homogenous product ā identical so no consumer preference (ex. Salt, wheat, coal etc.) ļ§ Large number of buyers and sellers ā no individual seller can influence price and output ļ§ Free entry and exit to industry Additional features ļ§ Perfect information available to buyers and sellers ļ§ Absence of or very low transportation cost ļ§ No artificial restrictions: Sellers are price takers ā have to accept the market price
- 6. Monopolistic Competition or Imperfect Competition 9/27/2016 6NHU 501 Dr N R Kidwai, JIT Barabanki ļ§ Free entry and exit to industry ļ§ Differentiated product which has a closer substitute. ļ§ Large number of Firmsā tough & real competition due to product differentiation ļ§ Some control over price: individual firms has some control over price. ļ§ Huge expenditure on advertisement/ promotion ļ§ Product variation or uniqueness: sale of firm depends on its uniqueness, differentiation with substitutes.
- 7. Oligopoly 9/27/2016 7NHU 501 Dr N R Kidwai, JIT Barabanki ļ§ Entry and exit barriers ļ§ Differentiated product which has a closer substitute. ļ§ Few sellersā Sellers enjoy a considerable control of the market, complete interdependence among sellers ļ§ Some control over price: individual firms has some control over price. ļ§ Significant expenditure on advertisement/ promotion ļ§ Lack of uniformity among the firms. ļ§ Homogeneous Products: Perfect oligopoly (aluminium, copper, iron, steel) ļ§ Heterogeneous product: Imperfect or differentiated oligopoly (bike, cars, TV etc)
- 8. Duopoly 9/27/2016 8NHU 501 Dr N R Kidwai, JIT Barabanki ļ§ Duopoly is a form of oligopoly when two firms control all or most of the market for a product or service.
- 9. Monopoly 9/27/2016 9NHU 501 Dr N R Kidwai, JIT Barabanki ļ§ Entry and exit barrier: huge investment, licence/ regulation, complex technologies, economies of scale ļ§ No close substitute of the product. ļ§ Single sellerā ie Firm is industry ļ§ Full control over supply: Elasticity of demand is zero ļ§ Influence over price: Hence firm is price maker
- 10. Summary of Market Structures 9/27/2016 10NHU 501 Dr N R Kidwai, JIT Barabanki Market Structure Number of Firms Entry/ Exit Barrier Product Nature Price Elasticity of Demand Degree of Control over price Perfect Competition Large number of firms None Homogeneous Infinite None Monopoly Single firm Strongest Unique with no closer substitute Small Highest Monopolistic Competition Large number of firms Almost None Differentiated Large Some Oligopoly Few firms Strong Homogeneous or differentiated Small Some