Market...

7/28/2019 Market Structurenncxzcxzczxcmzxmcm,.zx,.cm,.zx.c,x.zmc.zxm.mc,.zxm.cm.zxcm,zx.,c.mzx,.mc,.mzx,.mc,.zx,.cm,.xm,.c,.zm,.cm,.zxcxz,.c,xzc,.x,.cmzx,.mc,.zxm,.cm,.zx,.

http:///reader/full/market-structurenncxzcxzczxcmzxmcmzxcmzxcxzmczxmmczxmcmzxcmzxcmzxmcmzxmczxcmxmczmcmzxcxzcxzcxcmzxmczxmcmzxcmzxmczxcmzxcmxmc 1/24

Meaning of Market

In common language, the term market

refers to a place, where goods are

purchases and sold, such as Super

Bazaar, Connaught Place.The term market should not ignore the

demand and supply of the commodities.

It may be local, national and international

such as Foreign exchange market.



Markets on the basis of Competition

According to modern economists,

there can be markets

Perfect Competition

Zero Competition i.e Monopoly

Imperfect Competition



Market Structure

Market Structure means layout of themarket from which firm purchases its inputs

and where it sells its output.

The classification of market structures is

based upon the following elements :The number of firms producing the product

The nature of product produced by the

firmsPrice elasticity of the demand of the

product produced by the firm



Forms of

market

structure

Number of

firms

Nature of

Product

Status of

entry into

industry

Price

elasticity of

demand

Perfect

Competition

Large

number of

sellers

Homogeneo

us Product

Free entry

and exit

Infinite

Monopoly One No close

substitute

Strong

barriers to

entry

Very small

Monopolistic

competition

Fairly large

number of

firms

Close

substitute

products

Free entry

and exit

High



Meaning of Perfect competition

Perfect Competition is a market situation in

which there is large number of buyers and

sellers of a homogeneous product, and the

price of such a product is determined bythe market forces of demand and supply.

IN other words, in perfect competition the

golden principle ofone market, one price

operates completely and continuously.



Definition

In the words of Bilas, the perfect

competition is characterized by the

presence of many firms. They all sell

same product. The seller is a price-taker.



Features of perfect competition

Large number of sellers and buyers

Homogeneous product

Free entry and exit of firmsPerfect knowledge of the market

Lack of Selling Costs

Same Price



Price Determination under Perfect Competition

Price Demand for

Good x

Supply of

Good x

5 20 100

4 40 80

3 60 60

2 80 40



Monopolistic Competition

Imperfect competition, is the actual marketwhich we encounter in our daily life.

Of all kinds of imperfect competition, themost important one is monopolistic

competition.Monopolistic Competition may bedescribed as a combination of both perfectcompetition and monopoly or blending of

the two.It refers to that market situation in whichlarge number of producers produce goodswhich are close substitutes of each other.


http:///reader/full/market-structurenncxzcxzczxcmzxmcmzxcmzxcxzmczxmmczxmcmzxcmzxcmzxmcmzxmczxcmxmczmcmzxcxzcxzcxcmzxmczxmcmzxcmzxmczxcmzxcmxm 10/24

Definition

According to J.S.Bain, Monopolistic

Competition is found in the industry

where there is large number of small

sellers, selling differentiated but closesubstitute products.



Features of Monopolistic

Competition :

Large number of firms

Product Differentiation

Free entry and exit of firmsSelling Costs

Sales Techniques



What is Monopoly ?

The word Monopoly is composed of

two words : (i) Mono-which means

single (ii) Poly- which means seller

Thus, monopoly is a market situation

in which there is a single seller of a

good with no close substitutes.



Features or Necessary conditions

for the existence of Monopoly

One Seller and Large number of

Buyers

No close substitutes

Restriction on the Entry of New firms

Selling Costs



Price Discrimination or

Discriminating Monopoly

Sometimes a monopolist charges

different prices of the same product

from different buyers.

The price policy of the monopolist is

called price discrimination.

The monopolist practising is called

discriminating monopoly.



Definition

In the words of J.S.Bain, Price

Discr im ination refers str ict ly to the

pract ice by a seller o f charging o f

di f ferent pr ices from dif ferent

buyers for the same goods.



Kinds of Price Discrimination:

Personal Price discrimination

Price Discrimination according to Use

Price Discrimination according toTime

Geographical Price Discrimination

Price Discrimination is also related toAge, Gender, Status of the

Customers



Conditions of Price Discrimination

Existence of Monopoly

Difference in the elasticity of demand

Goods made to orderLegal Sanction

Behaviour of the consumers



SELLING COSTS

In order to sell their products, firms

under monopolistic competition have

to spend a lot on advertisement and

publicity.

In Economics, the total amount of

money spent on advertisement and

publicity for pushing the sale of theproduct is called selling cost.



Selling costs refer to those costs

which are incurred to increase the

sale of the product e.g. expenditureon advertisement, publicity,

commission to retailers, gifts and

concessions to customers etc.Definition

Sel l ing costs include al l

expenses incurred to increase

the demand for the goods .



Assumptions:

Selling costs are based on two

assumptions :

Buyers taste and demand can be

changed

Buyers do not have full knowledge

about the various types of product.



Shape of the Selling Costs

According to Chamberlin, selling costs curvesare also U-shaped.

Initially it falls and later it rises.

It means, in the beginning proportionate increase

in sales is more than the increase in selling costs.But after a point, proportionate increase in sales isless than increase in selling costs.

It implies that upto a point selling cost go on

diminishing but after a point the same tend toincrease.



MEANING OF OLIGOPOLY

The term Oligopoly is derived from twoGreek words.

Oligoi means few and Pollen means to

sell.Oligopoly is an imperfect market wherethere are a few sellers in the market,producing either identical products or

producing products which are close but notperfect substitutes of each other.

For Example, Steel, tyres, automobiles etc.



Main Features of Oligopoly :

A few sellers

Lack of Uniformity

Homogeneous of DifferentiatedProduct

Existence of Price Rigidity

Existence of Non-Profit Motive



CLASSIFICATION OF OLIGOPOLY

The Oligopoly may be classified on

the following basis :

On the basis of Product Differentiation

Perfect or Imperfect Oligopoly

On the basis of Entry of Firms Open

or Closed Oligopoly

Market...

Documents

Transcript of Market...