Market Structure: Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly

Market structure refers to the organizational and other characteristics of a market that influence the behavior and performance of firms operating within that market. It is essential to understand market structures because they determine the pricing strategies of firms, the level of competition, the efficiency of resource allocation, and ultimately, the overall performance of an economy. Economists classify markets based on different criteria, including the number of sellers and buyers, the nature of the product (whether homogeneous or differentiated), entry and exit barriers, control over prices, and the degree of competition. Understanding these characteristics is crucial for analyzing how markets function, how firms interact, and how consumers make purchasing decisions.

1. MARKET STRUCTURE Dr. Baranipriya A Assistant Professor Department of Economics Sri Ramakrishna College of Arts & Science Coimbatore - 641 006 Tamil Nadu, India 1

2. Meaning of Market Basically, when we hear the word market, we think of a place where goods are being bought and sold. In economics, market is a place where buyers and sellers are exchanging goods and services.

3. Type of Market Structure

4. Perfect Competition In a perfect competition market structure, there are a large number of buyers and sellers. All the sellers of the market are small sellers in competition with each other. There is no one big seller with any significant influence on the market. So all the firms in such a market are price takers. Example: Agriculture market

5. Features of Perfect Competition Many Buyers and Sellers Homogeneity Free Entry and Exit Perfect Knowledge  Mobility of Factors of Production Transport Cost Absence of Artificial Restrictions Uniform Price  

6. Monopolistic Competition In monopolistic competition, there are still a large number of buyers as well as sellers. But they all do not sell homogeneous products. The products are similar but all sellers sell slightly differentiated products. Example: Toothpaste

7. Features of Monopolistic Competition Large Number of Sellers Product Differentiation Selling costs Freedom of Entry and Exit Lack of Perfect Knowledge Pricing Decision Non-Price Competition

8. Oligopoly Oligopoly is defined as a market structure with a small number of firms, none of which can keep the others from having significant influence. An oligopoly is an industry which is dominated by a few firms. In this market, there are a few firms which sell homogeneous or differentiated products. Examples: automobiles, cement, steel, aluminium

9. Features of Oligopoly Few firms Barriers to Entry Non-Price Competition Interdependence Nature of the Product Selling Costs No unique pattern of pricing behaviour

10. Monopoly In a monopoly market, there is a single seller of a particular product with no strong competition from any other seller. Features: Single Seller of the Product Entry Restrictions No Close Substitutes Price Maker

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