Forms of market

FORMS OF MARKETChapter 9

Concept of Market Buyers

Sellers

Price

Commodity

Agreement

Market Structure

It refers to the types of market in which the producers or firms operate.

Factors affecting

1. Number of Buyers and Sellers2. Nature of the Product3. Knowledge about Market4. Freedom of Entry or Exit of the firm5. Degree of Price Influence

Classification of Markets

Perfect Competition Monopoly Monopolistic Competition Oligopoly

Perfect Competition

Meaning: It’s a market structure in which there are

a large number of producers (firms) producing a homogeneous product so that no individual firm can influence the price of the commodity.

Perfect Competition Features:

1. Large no. of buyers and sellers

2. Homogeneous Product

3. Free Entry & Exit

4. Perfect Mobility of Resources

5. Perfect Knowledge

6. Absence of Transport Cost

Monopoly

Meaning: It’s a market structure in which there

exits only a single seller of a product who is sole producer of the product which has no close substitutes.

Monopoly Features:

1. Single Seller

2. No Close Substitute

3. Closed Entry

4. Price Maker

5. Possibility of Price Discrimination

Monopolistic Competition Meaning:

It is the form of market in which there are large number of sellers of a particular product, with each seller selling somewhat differentiated but close product.

Monopolistic Competition Features:

1. Large no. of buyers and sellers

2. Differentiated Products

3. Free Entry & Exit

4. Selling Cost

5. Non-price Competition

6. Independent Price Policy

Oligopoly

Meaning: It is that form of market structure in

which there are a few firms selling a product so that there is intense competition among them.

Oligopoly Features:

1. Intense Competition

2. Interdependence

3. Nature of the Product

4. Importance of Selling Cost

5. Barrier to Entry

6. Indeterminate Demand Curve

Demand Curves of Firms

Perfectly Elastic

More ElasticLess Elastic

A. Perfect Competition

B. Monopolistic Competition

C. Monopoly

A

Y

XOutput

Price

Comparing Different Forms

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