The presentation describes various market structures and their characteristics; Perfect competition, Monopoly and Imperfect competition markets Monopolistic competition, Oligopoly, Duopoly

1. Market Structure
Perfect Competitions, Imperfect-
Monopolistic, Oligopoly, Duopoly,
Unit‐II
Perfect Competitions, Imperfect- Monopolistic,
Oligopoly, Duopoly, Sorbent features of price
determination and various market conditions.
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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
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Determinants of market structure are
• Degree of competition
• Freedom of entry and exit
• Nature of the product – homogenous (identical),
differentiated?
• Control over supply/output
• Control over price
• Barriers to entry

4. Market Structure
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Market structure is defined on the basis of
degree of competition in the industry
• Perfect Competition
• Monopolistic Competition
• Oligopoly
• Monopoly

5. Perfect Competition
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 Homogenous product – identical so no consumer
preference (ex. Salt, wheat, coal etc.)
 Large number of buyers and sellers – no individual
seller can influence price and output
 Free entry and exit to industry
Additional features
 Perfect information available to buyers and sellers
 Absence of or very low transportation cost
 No artificial restrictions: Sellers are price takers – have
to accept the market price

6. Monopolistic Competition or
Imperfect Competition
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 Free entry and exit to industry
 Differentiated product which has a closer substitute.
 Large number of Firms– tough & real competition due to
product differentiation
 Some control over price: individual firms has some
control over price.
 Huge expenditure on advertisement/ promotion
 Product variation or uniqueness: sale of firm depends on
its uniqueness, differentiation with substitutes.

7. Oligopoly
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 Entry and exit barriers
 Differentiated product which has a closer substitute.
 Few sellers– Sellers enjoy a considerable control of the
market, complete interdependence among sellers
 Some control over price: individual firms has some
control over price.
 Significant expenditure on advertisement/ promotion
 Lack of uniformity among the firms.
 Homogeneous Products: Perfect oligopoly (aluminium,
copper, iron, steel)
 Heterogeneous product: Imperfect or differentiated
oligopoly (bike, cars, TV etc)

8. Duopoly
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 Duopoly is a form of oligopoly when two firms
control all or most of the market for a product
or service.

9. Monopoly
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 Entry and exit barrier: huge investment, licence/
regulation, complex technologies, economies of
scale
 No close substitute of the product.
 Single seller– ie Firm is industry
 Full control over supply: Elasticity of demand is
zero
 Influence over price: Hence firm is price maker

10. Summary of Market Structures
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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