This document summarizes different market structures:
- Perfect competition has many small firms, identical products, free entry and exit, and firms are price takers.
- Monopoly has a single seller, high barriers to entry, and the firm can influence the market price.
- Monopolistic competition is between perfect competition and monopoly with many firms selling differentiated goods.
- Oligopoly has a few large firms producing either differentiated or similar products, where each firm is influenced by competitors.
2. Market
• In economics, market means a social system
through which the sellers and purchasers of a
commodity or a service (or a group of
commodities and services) can interact with
each other.
• Market does not refers to a place or a location.
• It refers to an institutional relationship between
purchaser and the seller.
• It links buyer and the seller.
5. Perfect Competition
• Perfect competition is a market structure in which
number of sellers sell a homogenous product at
uniform rate.
• A market is said to be Perfectly Competitive if it
satisfies the following features.
a. Large number of buyers and sellers
b. Firm under perfect competition is a price taker not
a price maker.
c. Homogenous product
d. Price is uniform
e. Free entry and exit
6. Perfect Competition
f. Profit maximization
g. No government regulation
h. Perfect mobility of factors: resources can move
freely from one firm to another without any
restriction.
i. Perfect knowledge
j. Absence of transportation cost
k. Perfectly elastic demand curve
10. Monopoly
• Monopoly refers to the market situation where there
is one seller and there is no close substitute to the
commodities sold by the seller.
• Seller has full control over the supply of that
commodity.
• One seller, so the monopoly firm and an industry are
the same.
• No close substitute
• Restriction on entry and exit of new firm
• Price maker
• Possibility of price discrimination
13. Monopolistic Competition
• It is that form of market in which there are large
numbers of sellers selling differentiated
products which are similar in nature but not
homogenous.
• This are closely related goods with a little
difference in Odour, size and shape.
• This was developed by an American Economist
“Chamberline”.
• It is a combination of Perfect Competition and
Monopoly.
15. Oligopoly
• Oligopoly is a market situation in which there
are few firms producing either differential goods
or closely differentiated goods.
• The number of firms is so small that every seller
is affected by the activities of the others.
• Oligopoly is of two types i.e. pure oligopoly and
differentiated oligopoly
• Control over supply, lack of uniformity of size of
firm, price rigidity, intense competition are
other features of oligopoly market.