MARKET

PRESENTED BY :
ANUJ IB/61
DEEPIKA IB/08
GAGAN IB/11
MUKUL IB/27
SHOBHNA IB/51
SUMIT IB/57
 Market
Market refers to the whole of region in which buyers and sellers of a
commodity are in contact with each other for purchase and sale of the
commodity.

Types of market

• Perfect competition
• Monopoly
• Monopolistic competition
• Duopoly

• Oligopoly
 PERFECT COMPETITION

Perfect competition is a market situation where a large number of buyers

and sellers are selling there closely related product almost at same
prices.

FEATURES :-

1. Presence of large number of buyers and sellers.

2. Homogeneous products.
3. Free entry and exist of the firm.
4. Perfect knowledge of market conditions.
5. Perfect mobility.
6. Absence of selling and transportation cost.

In such a market situation a firm is only the price taker and the
industry is the price maker.
PRICE DISCRIMINATION
UNDER
PERFECT COMPETITION
Equilibrium Of a Perfectly Competitive Firm:
Short Run Case

A
Equilibrium Of a Perfectly Competitive Firm:
Short Run Case

E
 Shut Down Point

PRICE
MC
OR
ATC
COST
AV
C

P AR=MR
S

O Q
QUANTIT
Y
Long Run Price and Output Under Perfect Competition

PRICE
OR COST
MC

AVC

P AR=MR
Z

O Q
QUANTITY
Advantages:
• Charge a lower price
• Competition encourages efficiency
• Optimal allocation of resources
• Unequal distribution of goods & income

Disadvantages:
• Lack of product variety
• Lack of competition over product design and specification
• Insufficient profits for investment
• Lack of supernormal profit may make investment in R&D unlikely
 Monopoly
In economics, a monopoly exists when a specific individual or a enterprise has
sufficient control over price, meaning that a consumer does not have choice,
cannot maximize his or her total utility and has have very little influence over
the price of goods.

Features:-

• Single Seller: There is only one producer of a product.

• No Close substitute: Monopoly market has no close substitute

therefore, practically does not face any competition.

• No Freedom To Entry: There is no freedom for the new firms to enter

the industry, it may be due to –

 Legal Barriers to Entry

 Patents
 Natural Barriers to Entry
 How Monopolies Can Develop

• Horizontal Integration: Where 2 firms join at the same stage of

production,
– E.g. A media company's ownership of radio, television,
newspapers, books, and magazines.

• Vertical Integration: Where a firm gains market power by controlling

different stages of the production process. A good example is the oil
industry. Where the leading firms produce, refine and sell oil.

• Legal Monopoly: E.g. Patents - Pfizer

• Internal Expansion of a firm: Firms can increase market share by

increasing their sales and possibly benefiting from economies of
scale.

• Being the First Firm: e.g. Microsoft

Price Determination Under Monopoly : Short Run

SA
SMC C
Unit Cost & Revenue

P
P
1
P2
M
N

M AR=
R D
O Q
Output per time unit
 Equilibrium of Monopoly in the Long Run

SAC1
SMC1
P1 LMC
J SMC2
K T
L P2 SAC2 LAC
Revenue & Cost

M S
B
P

AR=D

Q1 Q2 MR

Output
Advantages :
• Research and Development
• Economies of scale
• International Competitiveness
• A monopoly is thus a sign of success not inefficiency

Disadvantages:
• Higher Prices
• Productive Inefficiency
• Super normal Profit
• Higher Prices to Suppliers
 Perfect competition Vs Monopoly

1. Large no. of Sellers Vs One seller

2. Freedom to Enter Vs Restrictions
3. Perfect Knowledge Vs Imperfect Knowledge
4. Yes Supply Curve Vs No Supply Curve
5. P=MC Vs P>MC
THANK YOU