Market Structure Ppt

7/31/2019 Market Structure Ppt

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MARKETSTRUCTURE

Presented by:-Saachi Mahajan

miet jammu


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MARKET STRUCTURE Market structure identifies how a market is made up

in terms of: The number of firms in the industry.

The nature of the product produced. The degree to which the industry is vertically

integrated. The degree to which the firm can influence price. Firms behaviour pricing strategies, non-price

competition, output levels.


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MARKET STRUCTURE

Importance: Degree of competition affects the consumer

will it benefit the consumer or not ? Impacts on the performance and behaviour of

the company/companies involved.


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Market StructurePerfectCompetition

PureMonopoly

Monopolistic Competition Oligopoly Monopoly

The further right on the scale, the greater the degreeof monopoly power exercised by the firm.


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PERFECT COMPETITION

The term perfect competition refers to a set of condition prevailing in the market.

In other words, the model of a market that wasa pet of the classical and neo classical wasperfect competition.

Under perfect competition, a large number of firms compete against each other. Therefore,

The degree of competition under perfectcompetition is close to one.


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Examples of perfect competition:Financial markets stock exchange,currency

markets, bond markets Agriculture


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IMPERFECT COMPETITION Imperfect Competition consist of many

markets categories ranging from twosellers to a large number of buyers andsellers.


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Types of Imperfect Competition

Monopoly Oligopoly

Monopolistic


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MONOPOLOSTIC Monopolistic Competition where, degree of

competition is less. Under it the degree of freedom depend largely on the number of firmsand the level of product differentiation.

Some charactertics of Monopolistic Competition:- Many buyers and sellers. Products differentiated.

Relatively free entry and exit.EXAMPLES:-Resturants,Profession,Plumbers etc.


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MONOPOLY

The word monopoly is composed of two words;1. mono, which means single2. Poly, which means a seller.

Thus monopoly is a form of market organization for acommodity in which there is one seller of thecommodity. There is no close substitute for thecommodity sold by the only seller. The seller has fullcontrol over the supply of the commodity. In monopolythe degree of competition is close to nil. The monopolistis a price-maker.Acc. To P.C. Dooley , "A monopolist is a market withone seller.


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FEATURES OF MONOPOLY One seller and a large number of buyers. No close substitute. Restriction on the entry of the new firms. Informative selling costs. Firm controls price OR output/supply. Abnormal profits in long run. Consumer choice limited.


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CAUSES AND KINDS

Some monopolies are created by law in the public interest. Eg: telephoneservices, Indian Railways, State Roadways etc. are public monopoly.

The state may also create monopolies in private sector alsothrough license and patent.

Control over raw material, secret methods of production or specialised skillswhich might give him monopoly power. E.g. : De Beers company of SouthAfrica owns most of the diamond mines there and controls the prices of diamonds by restricting productions.

The necessity of having large resources, as is the case where the minimumefficient scale of operations is very large, may often create monopoly.

Ignorance, laziness, and prejudice of the buyers may create monopoly infavour of a particular producer.


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ADVANTAGES OF MONOPOLY :

Encourages R&D Encourages innovation

Development of some products not likely withoutsome guarantee of monopoly in production Economies of scale can be gained consumer may

benefit


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Disadvantages of Monopoly Exploitation of consumers Higher prices. Potential for supply to be limited Less

choice Potential of inefficiency. Ban to the entry of other firms in the

market.


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PRICING AND OUTPUT DECISION : SHORT-RUN

In short-run monopolist may be inthree positions during equilibrium :

Abnormal profit when AR>AC; Normal profit when AR=AC;

Minimum loss when AR


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Pricing and Output decisions - Long-Run

Monopoly gets opportunity to resize its firm. Expansion of the plant size depends upon the

following conditions:- a)Size of the market.

b)Expected economic profit. c)Risk of inviting legal restrictions.


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Price and Output determination -long-run

AR and MR curves shows the market demand and marginal revenue conditions .

LAC and LMC show the long-run cost conditions.

LMC and MR intersect at point P giving output OQ 2 at price P 2Q 2.

Total monopoly profit is LMSP 2.


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Total profit in short-run is shown by JP 1TK

which is smaller than the long-run profit area LP 2SM.

Profit in the short-run and long-run depends

upon the cost and revenue conditions .


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Price Discrimination Under Monopoly

To sell a product at the same or different price.

Based on their age, Income, Location,Quantity purchased, location etc.

OR

Also same price being charged in different areas but the production is not same .


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E.g.:-1. Physicians and lawyers charges on thebasis of customers ability to pay. 2.Railways and airlines charges less to children's and students and the class of travelers. 3.Different rates for cinema shows etc.

Market Structure Ppt

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