Bicol University Polangui Campus Polangui, Albay Reporters: Joan Pauline R. Oloroso Angelica B.

Yumang Year & Course: BSCpE-II Subject: Social Science 4- Basic Economics, Taxation & Agrarian Reform Instructor: Mr. Samuel Rion

CHAPTER 7: MARKET STRUCTURES

MARKET
When buyers wishing to exchange money for a good or service are in contact with sellers wishing to exchange goods and services for money, a market exists. A market may be confined to a specific geographical area, like a certain town where buyers and sellers meet.

Pure or perfect competition is that market situation characterized by the following: 1. The products of firms in the industry under consideration are standardized. 2. The buyers and the seller are without power to change the going market price of the product. 3. The absence of restraints of any kind is an important feature. 4. Buyers, sellers, and resource owners have perfect knowledge of market conditions. Pure or perfect competition is a creation of theory. It is very difficult, for instance, to eliminate all restraints in the activities of firms. Also, tremendous amounts of resources would be needed to maintain perfect knowledge of market conditions by so many people.

Kinds of Market Structures

Market structure may be classified into the following: 1. The pure or perfect types a) Pure or perfect competition b) Pure or perfect monopoly 2. The imperfect type a) Monopolistic competition b) Oligopoly

PURE OR PERFECT MONOPOLY

Pure monopoly is that market structure characterized by only one producer of a product. Examples of monopolies include firms that supply electricity and water.

PURE OR PERFECT COMPETITION

MONOPOLISTIC COMPETITION
Monopolistic competition is that type of market structure where there are a large number of sellers that produce similar products, but this market structure, the products of many sellers are identical and even interchangeable like rice and tomatoes.

In pursuing this objective, however, he faces three possible cost situations: 1. Constant costs 2. Increasing costs 3. Decreasing costs

PRICE AND OUTPUT DETERMINATION UNDER OLIGOPOLY

In setting the price of his products, the oligopolist is faced with the ff. 1. If he cuts his price, competitors will retaliate and he will not gain anything, but short-term profits from his initial move. 2. If he raises his price, his customers will move to his competitors. His sales volume and consequently, his sales revenue will decline.

OLIGOPOLY
Oligopoly is that market structure in which there are a limited number of firms competing for a given industry. The products of oligopolists are homogeneous or identical.

OUTPUT AND PRICE UNDER

PURE COMPETITION The price of the product in a pure competition cannot be influenced by any seller or buyers.

PRICE AND OUTPUT DETERMINATION UNDER MONOPOLY

Since the monopolist is the sole seller in the market, his demand curve is also the industrys demand curve. When he raises his prices, the quantity he disposes will be reduced.

PRICE DETERMINATION UNDER MONOPOLISTIC COMPETITION

The firm in a monopolistic competition strives to differentiate its products from that of its competitors. If it is successful in maintaining a sizable group of loyal customers, it will attempt to maximize profits, observing the law of supply and demand.

FIXING THE MONOPOLY PRICE

The monopolist will naturally seek the price and quantity combination that will bring him the greatest amount of profits.