MANAGERIAL ECONOMICS MBA SEM 1 MArket structure

PPT

1. MANAGERIAL ECONOMICS MARKET STRUCTURE

2. MARKET STRUCTURE Market structure, in economics, refers to how different industries are classified and differentiated based on their degree and nature of competition for goods and services. It is based on the characteristics that influence the behavior and outcomes of companies working in a specific market.

3. Understanding Market Structures In economics, market structures can be understood well by closely examining an array of factors or features exhibited by different players. It is common to differentiate these markets across the following seven distinct features. The industry’s buyer structure The turnover of customers The extent of product differentiation The nature of costs of inputs The number of players in the market The largest player’s market share

4. TYPES OF MARKET STRUCTURES Monopoly Competition In a monopoly market, a single company represents the whole industry. It has no competitor, and it is the sole seller of products in the entire market. This type of market is characterized by factors such as the sole claim to ownership of resources, patent and copyright, licenses issued by the government, or high initial setup costs. Example: Railway is the only Company in the India which work on the Monopoly Market Structure.

5. Main Features of Monopoly Competition A monopoly market is characterized by the profit maximize, price maker, high barriers to entry, single seller, and price discrimination. Monopoly characteristics include profit maximize, price maker, high barriers to entry, single seller, and price discrimination. There are a few similarities between a monopoly and competitive market: the cost functions are the same, both minimize cost and maximize profit, the shutdown decisions are the same, and both are assumed to have perfectly competitive market factors. Differences between the two market structures including: marginal revenue and price, product differentiation, number of competitors, barriers to entry, elasticity of demand, excess profits, profit maximization, and the supply curve. NOTE: FOR PRICE AND OUTPUT DETERMINATION PLEASE USE THE GRAPHICALLY REPRESENTATION (discuss in class).

6. TYPES OF MARKET STRUCTURES Perfect Competition Perfect competition occurs when there is a large number of small companies competing against each other. They sell similar products (homogeneous), lack price influence over the commodities, and are free to enter or exit the market. In the Perfect Competition the price of product is determined at a point at which the demand and supply curve intersect each other. This is point is called Equilibrium point as well as the price is known as Equilibrium price. Example : Clothing Brand ( W, Aurela , Biba etc) Clothing Brand ( Peter England , Alley solly , U.S. Polo) Watches ( Fast Track, Titan , Casio, Timex etc)

7. TYPES OF MARKET STRUCTURE Features of Perfect Competition Large Number of Buyers and Sellers They deal in Homogenous Product Free Entry and Exit of Firms Each firm has Perfect knowledge about market. Firm is a Price Taker No Artificial restrictions Perfect Mobility of Factors of Productions

8. TYPES OF MARKET STRUCTURE Monopolistic Competition refers to a market with the traits of both the monopoly and competitive market. Sellers compete among themselves and can differentiate their goods in terms of quality and branding to look different. In this type of competition, sellers consider the price charged by their competitors and ignore the impact of their own prices on their competition .

9. TYPES OF MARKET STRUCTURE Features of Monopolistic Competition Large Number of Firms (countable Number). Free Entry and Exist in the market. Firm have some control on the price. Selling Cost ( Firms have to spend much on the activities like Advertising , Promotional Activities etc). Product differentiation Non Price Competition ( ex: on the bases of Design of the Product , Packaging of the product)

10. TYPES OF MARKET STRUCTURES Oligopoly An oligopoly market consists of a small number of large companies that sell differentiated or identical products. Since there are few players in the market, their competitive strategies are dependent on each other. Features of Oligopoly A few firms with large market share High barriers to Entry Interdependence of Decision Making Each Firm has little market Power in its own right Higher Prices than Perfect Competition Most Efficient

11. Differential Pricing Differential pricing is a Practice of charging different prices to different customers. The companies adopt the differential pricing method with an objective to maximize the profit of an organization. This strategy is also known as discriminatory pricing or multiple pricing. Example: Cinema Hall, Amusement Park, Airline Example : Ola Cab services

12. Economics of Differential Pricing typically distribute in three level First Degree : It is refers to a situation where a seller charges each individual consumer the maximum price he or she is willing to pay the price . Second Degree : It is refers to a Price at which each unit of good sold varies in accordance with quantity a consumer buys.( Bulk Purchase Discount) Third Degree : It is refers to a Price Discrimination occurs when the sellers charges different prices to different customer groups, where groups are defined by key characteristics.

13. Benefits of Differential Pricing Offering discounts allows your company to expand to customer who might not otherwise buy your product. The lower price make your business more attractive to the group you target the company’s overall sales increase due to this expanded customer base.