Market structure


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Market structure

  1. 1. MARKET STRUCTURE Prepared by: Arnel O. Rivera MAT-SS
  2. 2. What is the market structure? <ul><li>The state of a market with respect to competition. </li></ul>
  3. 3. What are the main criteria used to distinguish the different market structure? <ul><ul><li>Number and size of producers and consumers </li></ul></ul><ul><ul><li>Types of goods and services being sold. </li></ul></ul><ul><ul><li>Availability of information about the products being sold. </li></ul></ul>
  4. 4. TYPES OF MARKET STRUCTURES <ul><li>Perfect competition </li></ul><ul><li>Oligopoly (Monopolistic competition) </li></ul><ul><li>Monopoly </li></ul><ul><li>Monopsony </li></ul>
  5. 5. PERFECT COMPETITION <ul><li>A market in which there are many small firms, all producing the same goods. </li></ul><ul><li>No single firm has influence on the price of the product it sells. </li></ul>VS
  6. 6. PERFECT COMPETITION <ul><li>The conditions are very strict, there are few perfectly competitive markets </li></ul><ul><li>Insufficient profits for investment </li></ul><ul><li>Lack of product variety </li></ul><ul><li>Unequal distribution of goods & income </li></ul><ul><li>Helps allocate resources to most efficient use </li></ul><ul><li>Encourages efficiency </li></ul><ul><li>Consumers benefit: consumers charged a lower price </li></ul><ul><li>Responsive to consumer wishes </li></ul>Disadvantages Advantages
  7. 7. MONOPOLY <ul><li>A market in which there are many buyers but only one seller </li></ul><ul><li>A single firm selling all output in a market </li></ul>
  8. 8. MONOPOLY <ul><li>Exploitation of consumer – higher prices </li></ul><ul><li>Potential for supply to be limited - less choice </li></ul><ul><li>Potential for inefficiency </li></ul><ul><li>Encourages R&D </li></ul><ul><li>Encourages innovation </li></ul><ul><li>Economies of scale can be gained </li></ul>Disadvantages Advantages
  9. 9. OLIGOPOLIES, CARTELS AND MONOPOLISTIC COMPETITIONS <ul><li>Oligopoly - there are few sellers and many unidentified buyers. </li></ul><ul><li>Monopolistic competition – there are a few sellers supplying the market with different types of brands of the same product and capturing a specific group of buyers for a particular brand. </li></ul><ul><li>Cartels – sellers agree to coordinate prices and production. </li></ul>
  10. 10. EXAMPLES:
  11. 11. EXAMPLES:
  12. 12. OLIGOPOLIES, CARTELS AND MONOPOLISTIC COMPETITIONS <ul><li>High barriers to entry </li></ul><ul><li>Potential for conspiracy </li></ul><ul><li>Abnormal profits </li></ul><ul><li>High degree of interdependence between firms </li></ul><ul><li>Products differentiated </li></ul><ul><li>Firm has some control over price </li></ul><ul><li>Products could be highly differentiated </li></ul><ul><li>Non–price competition </li></ul><ul><li>Price stability within the market </li></ul>Disadvantages Advantages
  13. 13. MONOPSONY <ul><li>Single buyer faces many sellers </li></ul><ul><li>A form of imperfect competition </li></ul><ul><li>Sells products with higher price </li></ul><ul><li>Buys material with lower price </li></ul>
  14. 14. MONOPSONY <ul><li>Abnormal profits </li></ul><ul><li>Unequal distribution of goods & income </li></ul><ul><li>Lower cost </li></ul><ul><li>Dictate exact specifications to suppliers </li></ul><ul><li>Don’t have risks </li></ul>Disadvantages Advantages
  15. 15. SUMMARY Market Structure Seller Entry Barriers Seller Number Buyer Entry Barriers Buyer Number Perfect Competition No Many No Many Monopolistic competition No Many No Many Oligopoly Yes Few No Many Monopoly Yes One No Many Monopsony No Many Yes One
  16. 16. CONCLUSION: <ul><li>Market structure can be described with reference to different characteristics of a market, including its size and value, the number of providers and their market share, consumer and business purchasing behavior, and growth forecasts </li></ul>
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