2. Market is a place where buyers and sellers appear to conduct exchange
transactions.
The only requirement of a market is that all potential buyers and sellers
should be in close contact with each other to conduct exchange
transaction.
According to Cournot : “Market is not any particular place in which things
are bought or sold, but the whole of any region in which buyers and sellers
are in such free interaction with each other that the prices of the same
goods tend to equality easily and quickly”.
Basic Features :
Buyers
Sellers
Interaction
Existence of a commodity
Price
3. Market:
Benham stated market ‘’as any
area over which buyers and
sellers are in close touch with
one another either directly or
through dealers , that the price
obtained in one part of market
affects the price paid in other”
Stonier and Hague explains the
term market as'' any org
whereby buyers and sellers of
good r kept in close contact with
each other…there is no need to
for a market to be in a single
building…
the only essential for a market is
that all buyers and sellers should
be in constant touch with each
other , either because they r in the
same building or because or they r
able to contact through telephone
or internets.
4. Market Classification
On the basis of area
On the basis of nature of transaction
On basis of volume of business
On the basis of time
On the basis of status of seller
On the basis of regulation
5. PERFECT COMPETITION
Definition of Perfect competition:
A market in which there are many small firms, all
producing homogeneous goods.
No single firm has influence on the price of the
product it sells.
6. Perfect competition:
A very large no of relatively small
buyers and sellers .
• All sellers sell homogenous
products
• The firms are free to enter or leave
the market
• The firms in industry don’t collude
with each other .
• The factors of production must be
free to enter or leave the industry.
• Each buyer and seller operates
under the condition od certainty.
7. 1. Pure/Perfect Competition
Large number of buyers and sellers
Identical product
Well informed buyers and sellers
More Competition Less Competition
9. Feature of Perfect competition
Many buyers / Many sellers
Homogeneous Products
Low-entry / exit barriers
Perfect information – For both consumers and
producers
Firms aim to maximize
10. PERFECT COMPETITION
Advantages of perfect competition:
High degree of competition helps allocate resources
to most efficient use
Price = marginal costs
Competition encourages efficiency
Firms operate at maximum efficiency
Consumers benefit: consumers charged a lower price
Responsive to consumer wishes: Change in demand,
leads extra supply
11. PERFECT COMPETITION
Disadvantage of perfect competition:
The conditions for perfect competition are very strict,
there are few perfectly competitive markets
Insufficient profits for investment
Lack of product variety
Lack of competition over product design and
specification
Unequal distribution of goods & income
Externalities e.g. Pollution
15. MONOPOLY:
• The single firm
producing the product is
in itself both the firm
and industry.
• No rivalry or direct
competition
• Indirect rivalry may occur
in form of the existence
of small substitutes
• They are price makers
20. Monopoly
1. Technological Monopoly
- new invention
Patent: exclusive right for
17 years
“The Segway PT is a two-
wheeled, self-balancing,
battery-powered electric
vehicle invented by Dean
Kamen. It is produced by
Segway Inc. of New
Hampshire, USA. The
name Segway is a
homophone of the word
segue, meaning smooth
transition”
Segway
21. Monopoly
1. Technological
Monopoly - new
invention
Copyright: lifetime + 50
years
“The National Football
League is a professional
American football
league that constitutes
one of the four major
professional sports
leagues in North
America”
This telecast is copyrighted by the NFL for the private use of our audience. Any
other use of this telecast or of any pictures, descriptions, or accounts of the
game without the NFL’s consent, is prohibited.
23. MONOPOLY’S CHARACTERISTICS
A single firm selling all output in a market : it is a
direct contrast to perfect competition.
Unique product:
Barriers to Entry and Exit.
Government license or franchise
Resource ownership
Patent and copyrights
High start- up cost
Decreasing average total cost
Specialized information
25. ADVANTAGES OF MONOPOLY
Import the products and compete with foreign
companies
Complete freedom in selecting prices or quantity
No guarantee of profitability........ there is only one firm
26. DISADVANTAGES OF MONOPOLY
The prices charged even increase prices
Reduce the quality of the products
Reduce the satisfaction of the customers
Cause many disadvantages for the employees of the
company
27. Origin of monopoly :
Patent rights for products
Gov. policies such as granting licenses or imposing
foreign trade restrictions.
Ownership and control over some strategic raw
materials
Exclusive knowledge of technology by the firms.
Size of the market can accommodate a single firm
Prevention of entries
28. Monopolistic competition
• It refers to the situation where
there are many sellers of
differentiated products . There
is competition keen though not
perfect, between many firms
making very similar products
.since the product is
differentiated each seller can
independently decide about his
own price output policies.
FEATURES
• Many number of sellers
• Product differentiations
• freedom of entry and exit
29. MONOPOLISTIC COMPETITION
What is Monopolistic Competition?
Monopolistic Competition, also called competitive
market, where there are a large number of
independent firms which have a very small
proportion of the market share
31. MONOPOLISTIC COMPETITION
There are few barriers to entry and exit.
Each firms may have a tiny “monopoly”.
Firm has some control over price.
32. MONOPOLISTIC COMPETITION
Monopolistic Competition and Perfect Competition.
Monopolistic competitive firms produce products that are not
perfect substitutes or are at least perceived to be different to all
other brands products.
Unlike in perfect competition, the monopolistic competitive firm
does not produce at the lowest possible average total cost
Perfect competition is an economic model that describes a
hypothetical market form in which no producer or consumer has
the market power to influence prices. While monopolistic
competition is inefficient, perfect competition is the most
efficient, with supply meeting demand and production therefore
matching this, so stock is not sat in storage for prolonged periods
or going to waste
33. Price difference with in price range
Increase elasticity of demand
Price war
Gift articles
Unfair methods
34. Price discrimination
It is said to exist when the same product is sold for
different prices to different buyers. Conditions for
price dicr. Are:
Difference in price elastisities.
Market segmentation
Efficient separation of sub markets
Legal sanction for price discrimination
Various brands
Some buyers are ignorant or lack mobility
46. 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…features of
oligopoly are
• Small number of large sellers
• Interdependence
• Existence of price rigidity
• Presence of monopoly element
• Advertising
• Restriction to the entry
47. Oligopoly
A few very large sellers dominate the industry
Oligopolists act independently by lowering prices
soon after the first seller announces the cut
Collusion: formally agree to set prices
Engage in price wars
More Competition Less Competition
56. Classifying oligopoly situation:
On basis of product differentiation:
Entry of firm.
Price leadership.
Agreement between the firms.
57. Kinds of Market Structure
Types of
Market
Seller
Entry
Barrie
rs
Seller
Number
Buyer
Entry
Barrier
s
Buyer
Numbers
Product type Price
Perfect
Competition
No Many No Many Homogeneous Uniform
Monopoly
(Pure)
Yes One No Many Homogeneous Uniform
Monopoly
(Discriminating
)
Yes One No Many Differentiated Differentiated
Monopsony No Many Yes One Homogeneous Lowest
possible price
Monopolistic
Competition
No Many No Many Differentiated Differentiated
Oligopoly Yes Few No Many Homogeneous
or
Differentiated
High
Duopoly Yes Two No Many Homogeneous
or
Differentiated
High
