Market structure

MARKET STRUCTURE- By SHIVESH GUPTA

FLOW OF CONTENT:• MEANING OF MARKET.

• ESSENTIAL OF MARKET & INTERNAL CONDITION IN COUNTRY AFFECTING MARKET.

• CLASSIFICATION OF MARKET.

• PERFECT COMPETITION & ITS FEATURES.

• PURE COMPETITION & ITS FEATURES.

• MONOPOLY & ITS FEATURES.

• MONOPOLISTIC COMPETITION & ITS FEATURES.

• OLIGOPOLY & ITS FEATURES.

• DUOPOLY & ITS FEATURES.

MARKET STRUCTURE:-• MARKET: In common language the term market means a specific place where buyers and sellers of a commodity meet and exchange their goods. But in economics, market does not necessarily mean a place, but it is an arrangement through which buyers and sellers come in contact with each other directly or indirectly and exchange of goods take place among them.

• According to J.K. Mehta ;‘The word market signifies a state in which a commodity has a demand at a place where it is offered for sale.

ESSENTIAL OF MARKET:

• MARKET IS AN AREA NOT A PLACE• PRESENCE OF BUYERS ANS SELLERS• CLOSE TOUCH BETWEEN BUYERS AND SELLERS• A SINGLE COMMODITY

FACTORS AFFECTING MARKET: INTERNAL CONDITION OF COUNTRY AFFECTING MARKET:DEMAND MEANS OF TRANSPORT & COMMUNICATION PORTABILITY STABLE CURRENCY DURABILITY GOVERNMENT POLICYADEQUACY OF SUPPLY PEACE & SECURITYSUITABILITY OF SAMPLING & GRADING SCIENTIFIC METHODS OF SALES

MARKET

AREA

LOCAL REGIONAL NATIONAL INTERNATIONAL

FUNCTION

GENERAL SPECIFIC SAMPLE GRADE

TIME

DAILYBASIS

SHORTPERIOD

LONGPERIOD

LEGALITY

FAIR BLACK

CLASSIFICATION OF MARKET:

MARKET CAN ALSO BE CLASSIFIED ON THE BASIS OF COMPETITION:-

• PERFECT COMPETITION.

• PURE COMPETITION.

• MONOPOLY.

• MONOPOLISTIC COMPETITION.

• OLIGOPOLY.

• DUOPOLY.

THESE MARKET CAN BE EXPLAINED IN DETAILS.

PERFECT COMPETITION:A PERFECTLY COMPETITIVE MARKET IS ONE WHICH HAS A LARGE NUMBERS OF BUYERS & SELLERS OF A HOMOGENEOUS PRODUCT. ACCORDING TO PERFECT COMPETITION NO PARTICIPANTS IN THE MARKET ARE LARGE ENOUGH TO HAVE THE POWER TO SET THE PRICE OF THE PRODUCT.THIS INDICATES THAT THE NUMBER OF SELLERS IS SO LARGE THAT THE OUTPUT OF A SINGLE SELLER IS NEGLIGIBLE SMALL PORTION OF TOTAL OUTPUT OF THE COMMODITY.

FEATURES OF PERFECT COMPETITION:• LARGE NO. OF SELLERS/ SELLERS ARE PRICE TAKERS.

• LARGE NO. OF BUYERS.

• FREE ENTRY & EXIT.

• HOMOGENEOUS PRODUCT.

• PERFECT KNOWLEDGE.

• SINGLE PRICE.

• PERFECT MOBILITY OF FACTORS OF PRODUCTION.

• NO TRANSPORTATION COST.

• NON INTERVENTION OF GOVERNMENT.

PURE COMPETITION:PURE COMPETITION IS A PART AND PARCEL OF PERFECT COMPETITION.

ACCORDING TO CHAMBERLIN, “A MARKET BECOMES PURE WHEN MONOPOLY IS KEPT AWAY.”

PURE COMPETITION HAS CERTAIN FEATURES THAT HAS BEEN DERIVED FROM PERFECT COMPETITION:

• LARGE NO. OF SELLERS.

• LARGE NO. OF BUYERS.

• FREE ENTRY & EXIT.

• HOMOGENEOUS PRODUCT.

• SINGLE PRICE.

MONOPOLY:IN SIMPLE TERMS ‘MONO’ MEANS SINGLE AND ‘POLY’ MEANS SELLER. THUS THE MONOPOLY MEANS SINGLE SELLER WHO HAS COMPLETE CONTROL OVER THE SUPPLY OF THE COMMODITY. THERE IS NO CLOSE SUBSTITUTE OF THE COMMODITY. DUE TO ABSENCE OF COMPETITION, MONOPOLIST IS A PRICE MAKER NOT A PRICE TAKER.

FEATURES OF MONOPOLY:• SINGLE SELLER

• NO CLOSE SUBSTITUTE

• BARRIERS TO ENTRY

• NO DISCRIMINATION BETWEEN FIRM AND INDUSTRY

• CONTROL OVER THE MARKET SUPPLY

• PRICE MAKER

• PROFIT MAXIMIZATION

• PRICE DISCRIMINATION

MONOPOLISTIC COMPETITION:MONOPOLISTIC MARKET STRUCTURE IS A TYPE OF AN MARKET STRUCTURE WHICH IS REALISTIC IN NATURE. IN THIS MARKET THERE IS AOME FEATURES OF MONOPOLY AND SOME FEATURES OF PERFECT COMPETITION.

THE MARKET WHICH HAVE LARGE NO. OF PRODUCERS PRODUCING DIFFERENTED PRODUCTS WHICH ARE CLOSE SUBSTITIUTE TO EACH OTHER ENGAGE IN NON PRICE COMPETITION.

FEATURES OF MONOPOLISTIC COMPETITION:• FAIRLY LARGE NO. OF BUYERS.

• FAIRLY LARGE NO. OF SELLERS.

• PRODUCT DIFFERENTIATION.

• CLOSE SUBSTITUTE.

• SELLING COST.

• FREE ENTRY & EXIT.

• CONCEPT OF GROUP.

OLIGOPOLY:OLIGOPOLY IS A TYPE OF IMPERFECT COMPETITION IN WHICH FEW SELLERS COMPETE WITH EACH OTHER PRODUCING EITHER A HOMOGENEOUS PRODUCT OR DIFFRENTED PODUCT.

FEATURES OF OLIGOPOLY ARE AS FOLLOWS:

• FEW SELLERS.

• STANDARD PRODUCT OR DIFFERENTED PRODUCT.

• DIFFICULT ENTRY & EXIT OF FIRMS.

• ADVERTISEMENT & SALES PROMOTION ACTIVITIES.

DUOPOLY:DUOPOLY IS THE STATE OF MARKET IN WHICH THERE IS ONLY TWO SELLERS OF PRODUCT. PRODUCTS O BOTH THE SELLERS ARE IDENTICAL AND THEREFORE, BOTH THE SELLERS FOLLOW A UNIFORM PRICE POLICY. A CHANGE IN PRICE POLICY BY ONE IS BOUND TO EVOKE A REACTION ON THE PART OF OTHER. IN SOME CASES THE PRODUCT OF THESE TWO IS TO SELL US MAYBE DIFFERENT FROM EACH OTHER. IN SUCH CASE, PRICE OF THE PRODUCT MAY ALSO BE DIFFERENT.

FEATURES OF DUOPOLY:TWO FIRMS IN MARKET.

STRONG CONTROL OVER THE PRICE.

USES NON PRICE COMPETITION TO COMPETE.

VERY STRONG BARRIERS TO ENTRY

E.g. VISA AND MASTERCARD WHO IS THE BEST IN ELECTRONIC PAYMENT.

CONCLUSION:• AFTER ANALYZING THE FEATURES OF PERFECT COMPETITION, IT IS CLEAR THAT PERFECT COMPETITION

IS IDEAL FORM OF MARKET, BUT IT IS VERY DIFFICULT TO REALIZE THE CONDITIONS PRACTICALLY. SO, IT IS AN IMAGINARY CONCEPT.

• PURE COMPETITION IS A PART OF PERFECT COMPETITION.

• MONOPOLY – INDIAN RAILWAY IS THE BEST EXAMPLE OF MONOPOLY.

• MONOPOLISTIC COMPETITION IS REALISTIC IN NATURE, IT HAS SOME FEATURES OF PERFECT COMPETITION AND SOME FEATURES OF MONOPOLY.

• OLIGOPOLY IS A SITUATION OF A MARKET IN WHICH FEW SELLERS COMPETE WITH EACH OTHER PRODUCING EITHER A HOMOGENEOUS PRODUCT OR DIFFERENTED PRODUCT.

• DUOPOLY CONSISTS OF STATE OF MARKET IN WHICH THERE ARE TWO SELLERS PRODUCING IDENTICAK PRODUCTS AT SAME PRICE. IF PRODUCTS ARE DIFFERENT PRICES MAY VARY.

THANK YOU!