MAIN MARKET FORMS

INTRODUCTION
 In common parlance by market is meant a place. Where commodity is
bought and sold-but it is rough interpretation of the term.

 In economics the term market does not refer to a particular place but
it refer to a commodity .e.g.when we say wheat market. We do not
refer to a particular place.

 The market is a set of conditions in which buyers and sellers come in

contect for the purpose of exchange

 Economics usually classify market structure on the basis of two criteria-

(1)The number of firms working in the market.
(2)The characteristics of product.

 On the basis of these criteria economics consider four important types

of market :
FORMS OF MARKET STRUCTURE

PERFECT IMPERFECT
COMPETITION COMPETITION

MONOPOLISTIC
MONOPOLY COMPETITION OLIGOPOLY
PERFECT COMPETITION

A market form where there are many firms that

sell a certain homogenous product. A single
firm can not influence the market price. It is a
hypothetical situation; it cannot exist in real
case scenario. In this nobody can influence the
prices, including buyers and sellers It is also
believed that everyone has equal excess to
information.
DEMAND CURVE FOR A FIRM IN A
PERFECTLY COMPETITIVE MARKET:
THE DEMAND CURVE FOR AN INDIVIDUAL
FIRM IS EQUAL TO THE EQUILIBRIUM PRICE
OF THE MARKET. THE MARKET DEMAND
CURVE IS DOWNWARD-SLOPING.AQ
FEATURES

Large No. of Firms or Sellers

• Large No. of buyers

• Homogenous Product

• Perfect Knowledge

• Free Entry &Exit of Firms

• Perfect Mobility
IMPERFECT COMPETITION

MONOPOLY

MONOPOLISTIC COMPETITION

OLIGOPOLY
MONOPOLY

The term Monopoly means ‘alone to sell’.

 In a monopoly market, there is a single seller of a
particular product with no strong competition from
any other seller
EXAMPLES

 Railways in India
 Microsoft and Windows,

 DeBeers and diamonds,

 your local natural gas company.

FEATURES

SING
LE
SELL
ER

NO CLOSE
SUBSTITUT RESTRICTIONS ON
ENTRY AND EXIT
ES

MONOPOLY

PRICE
PRICE MAKER
DISCRIMINATIOM
MONOPOLISTIC COMPETITION
 A market situation where we find a large
number of buyers and sellers .
 Sell products that are differentiated from one
another (e.g. by branding or quality) and
hence are not perfect substitutes.
 A firm takes the prices charged by its rivals
as given and ignores the impact of its own
prices on the prices of other firms.
EXAMPLES
 Restaurants – restaurants compete on quality of
food as much as price. Product differentiation is a
key element of the business. There are relatively
low barriers to entry in setting up a new
restaurant.
 Hairdressers. A service which will give firms a
reputation for the quality of their hair-cutting.
 Clothing. Designer label clothes are about the
brand and product differentiation
 TV programmes – globalisation has increased the
diversity of tv programmes from networks around
the world. Consumers can choose between
domestic channels but also imports from other
countries and new services, such as Netflix.
FEATURES

Independent No entry and exit

Many firms
decision making cost in the long run

Buyers and Sellers

do not have
Product Some degree of
perfect information
differentiation market power
(incomplete
information)
OLIGOPOLY
 A state of limited competition, in which a
market is shared by a small number of
producers or sellers.  There are few firms in
the market, producing wither an identical
product or differentiated but the close
substitutes goods.  Oligopoly is derived from
the Greek words “oligos” which means a few
and “pollen” which means to sell.
FEATURES
Profit Maximization conditions
Ability to set price
Barrier to entry of firm
Number of firms
Long run profits
Product differentiation
Perfect Knowledge
Interdependence
Non-price competition
EXAMPLES
 In India, markets for automobiles, cement,
steel, aluminium, etc, are the examples of
oligopolistic market.

 (i)Pepsi and Coca-Cola in the soft drink

market; (ii) Airbus and Boeing in the
commercial large jet aircraft market; (iii) Intel
and AMD in the consumer desktop computer
microprocessor market.