Market

A market is a formal or informal social relation,

institution or infrastructure in which the
exchange of services, goods, information and
trade takes place. It is an organized
arrangement that brings together buyers and
sellers. Markets vary in location, types,
geographic range and size. The main purpose of
a market is to facilitate trade and distribute
resources to the economy.
 Perfect Competitive Market

• A Perfect Competitive Market is one that has

multiple buyers and sellers.
• In a perfectly competitive market, multiple
suppliers have an insignificant market share;
• standardized or homogeneous products are
supplied by each supplier;
• customers have full information on prices and
trends;
 Perfect Competitive Market
• all industry participants (new and existing
sellers) have equal access to technology and
other resources;
• there are no barriers to exit and entry;
• and the market is open to external
competition.
• A perfectly competitive market serves as a
benchmark for other real-world markets.
 Monopoly
• A monopoly or monopolistic market is one
that has only one firm (or seller) that has the
autonomy to raise and lower prices without
affecting the demand for its services and
products.
• Monopolies serve the needs of the sellers but
are detrimental to customers.
• They are characterized by an absence of
economic competition, technological
superiority,
 Monopoly
• no substitute for goods sold and a seller
having full control of market power (the ability
to lower and raise the prices without losing
clients or customers).
• Examples of monopolies include public utility
companies (water, electricity and gas) and
Internet service providers in remote areas.
 Monopsony

• A monopsony is a type of market in which a

single powerful buyer controls and affects
market prices.
• Multiple sellers offer goods and services, but
there is only a single buyer who has exclusive
control of market power and can bring the
prices of goods/services down.
 Oligopoly
• An oligopoly market is characterized by a
limited number of competing sellers who sell
similar or different products.
• Sellers compete with each other by aggressive
advertising and improved service delivery.
• An oligopoly sets barriers to entry and makes
it difficult for new sellers to enter the market.
• Barriers include patent rights, financial
requirements and legal barriers.
• Tobacco companies and airlines are
oligopolies.
 Oligopsony
• An oligopsony market has a few buyers and
multiple sellers.
• A duopsony is a type of oligopsony that has
two buyers. The buyers affect each other's
buying action.
 Monopolistic Competition
• There are no barriers to entering the market,
i.e. there are many firms
• But each firm sells a slightly different product
• For ex., coffee shops in any area provide
slightly different goods and compete for
customers.
• Local grocery store sells many brands of
toothbrushes, with slight differences in size,
color & style.
Characteristic Perfect Monopolistic Oligopoly Monopoly
Competition Competition

No. of firms Many Many few One

Type of product Homogeneous Differentiated Homogeneous or unique

differentiated

Firm specific Perfectly Elastic but not Less elastic from Firm faces market
Demand curve elastic perfectly monopolistically demand curve
competitive firm

Entry condition No barriers No barriers large barriers from large barriers

economies of scale from economies
or govt. policies of scale or govt.
policies