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Market structure

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Meet Shah

The document defines a market as the mechanism that brings together buyers and sellers, rather than being a fixed physical place. It discusses the key characteristics of a market, including the number/size of buyers and sellers, type of product, ease of entry/exit, and information transparency. It also defines different market structures - perfectly competitive, monopolistic competition, oligopoly, and monopoly - based on factors such as number of firms, product differentiation, barriers to entry/exit, and firms' price-setting power.

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Market structure
Those characteristics of the market that significantly affect the behavior and interaction of buyers and sellers. According to J.C. Edwards, A market is that mechanism by which buyers and sellers are bought together. It is not necessarily a fixed place.
Number and size of sellers and buyers Type of the product Conditions of entry and exit Transparency of information
(i) 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 and transport have made the market area for a product very wide. (ii) One Commodity: In economics, a market is not related to a place but to a particular product. Hence, there are separate markets for various commodities. For example, there are separate markets for clothes, grains, jewellery, etc.
(iii) Buyers and Sellers: The presence of buyers and sellers is necessary for the sale and purchase of a product in the market. (iv) Free Competition: There should be free competition among buyers and sellers in the market. This competition is in relation to the price determination of a product among buyers and sellers. (v) One Price: The price of a product is the same in the market because of free competition among buyers and sellers.
Market structure
Perfectly Competitive Less market power Price takers Goods are homogenous Free entry and exit Perfect Information Monopolistic Competition Many firms Free entry and exit Differentiated but highly substitutable product Oligopoly Small number of firms Product differentiation may or may not exist Barriers to entry Monopoly There is market power Single seller One product (limited or no good substitutes) Barriers to entry
Many and small sellers, so that no one can affect the market Homogeneous product Free entry to and exit from the industry Transparent and free information
Market structure
Multiple firms produce similar products Firms face down sloping demand curves Profit maximization occurs where MC=MR In the limit, firms compete away economic profits
Market structure
1. A single seller: the firm and industry are synonymous. 2. Unique product: no close substitutes for the firms product. 3. The firm is the price maker: the firm has considerable control over the price because it can control the quantity supplied. 4. Entry or exit is blocked.
AC:-Average Cost MC:-Marginal Cost
Few large firms: each must consider its rivals reactions in response to its decisions about prices, output, and advertising. Standardized or differentiated products Entry is hard: economies of scale, huge capital investment may be the barriers to enter.
Market structure
This Presentation was prepared by Meet Shah, Bhupendra Rawat, Jaimin Shah, Tejas Tewani & Prashant. Of F.Y.B.com A

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Market structure

  • 2. Those characteristics of the market that significantly affect the behavior and interaction of buyers and sellers. According to J.C. Edwards, A market is that mechanism by which buyers and sellers are bought together. It is not necessarily a fixed place.
  • 3. Number and size of sellers and buyers Type of the product Conditions of entry and exit Transparency of information
  • 4. (i) 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 and transport have made the market area for a product very wide. (ii) One Commodity: In economics, a market is not related to a place but to a particular product. Hence, there are separate markets for various commodities. For example, there are separate markets for clothes, grains, jewellery, etc.
  • 5. (iii) Buyers and Sellers: The presence of buyers and sellers is necessary for the sale and purchase of a product in the market. (iv) Free Competition: There should be free competition among buyers and sellers in the market. This competition is in relation to the price determination of a product among buyers and sellers. (v) One Price: The price of a product is the same in the market because of free competition among buyers and sellers.
  • 7. Perfectly Competitive Less market power Price takers Goods are homogenous Free entry and exit Perfect Information Monopolistic Competition Many firms Free entry and exit Differentiated but highly substitutable product Oligopoly Small number of firms Product differentiation may or may not exist Barriers to entry Monopoly There is market power Single seller One product (limited or no good substitutes) Barriers to entry
  • 8. Many and small sellers, so that no one can affect the market Homogeneous product Free entry to and exit from the industry Transparent and free information
  • 10. Multiple firms produce similar products Firms face down sloping demand curves Profit maximization occurs where MC=MR In the limit, firms compete away economic profits
  • 12. 1. A single seller: the firm and industry are synonymous. 2. Unique product: no close substitutes for the firms product. 3. The firm is the price maker: the firm has considerable control over the price because it can control the quantity supplied. 4. Entry or exit is blocked.
  • 14. Few large firms: each must consider its rivals reactions in response to its decisions about prices, output, and advertising. Standardized or differentiated products Entry is hard: economies of scale, huge capital investment may be the barriers to enter.
  • 16. This Presentation was prepared by Meet Shah, Bhupendra Rawat, Jaimin Shah, Tejas Tewani & Prashant. Of F.Y.B.com A