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1. ASSIGNMENT ON
MICROECONOMICS
NAME : SUMIT GORAI
Class :BBA

2. List of content
 Definitions of Market ??
 Types of market
• Perfect competitive market & its features
• Monopoly market & its features
• Monopolistically competitive market & its
features
• Monopsony market & its features
• Oligopoly market & its features
 Comparison
 Cross Elasticity of Demand
 Conclusion

3. WHAT IS MARKET ?
A market means a system or a set-up in which the
buyers
and sellers of a commodity are able to communicate
with each other and strike a deal about the price and
the quantity to be bought and sold.

4. FORMS OF MARKETS
Forms of
market
Perfect
Monopolisti
c
Monopson
y
Monopoly
Oligopoly

6. PERFECT COMPETITION MARKET
Perfect competition is a market structure where there
are a large number of producers producing a
homogenous product so that no individual firm can
influence the price of the commodity.

7. Features of Perfect competition market
 Large numbers of buyers and sellers.
 Freedom of Entry and Exit.
 All firms produce an Homogenous product.
 All firms are price taker, therefore firm’s demand
curve is perfectly elastic.
 There is perfect information and Knowledge.
 There is absence of transport cost.

9. EXAMPLES OF PERFECT COMPETITION
Foreign Exchange
Markets
 Currency is all
homogenous.
 Traders will have access to
many different buyers and
sellers.
 There will be good
information about relative
prices.
Rural Agricultural Market
 In some cases, there are
several farmers selling
identical products to the
market.
 These markets often get
close to perfect
competition.

11. MONOPOLY MARKET
The term monopoly is derived from the two Greek
words, namely, ‘Monos’ and ‘polus’ : ‘Monos’ means
single, and ‘Polus’ means seller.
Monopoly is a market structure in which there exists
only a single seller of the product, which has no close
substitutes.

12. FEATURES OF MONOPOLY
 Single seller
 Large numbers of buyers
 Absence of close substitutes
 Price discrimination
 No selling costs
 No free entry and exit of firm
 Relatively inelastic demand curve

16. MONOPOLISTIC MARKET
Monopolistic competition is the form of market
structure in which there are a relatively large number
of sellers of a particular product, but each seller sells
a somewhat differentiated product.

17. FEATURES OF MONOPOLISTIC
COMPETITION
 Large numbers of buyers and sellers
 Product differentiation
 Free Entry and Exit of firm
 Sales promotion
 Non-price competition
 Buyers and sellers do not have perfect information

19. EXAMPLES OF MONOPOLISTIC
COMPETITION
 Some restaurants enjoy monopolistic competition
because of their popularity and reputation.
 Demand for some specific models of automobiles
outstrips the production capacity. This creates
situation of monopolistic competition.
 Some newspaper in some places enjoy almost
monopolistic position in spite of existence of other
competitors.

21. MONOPSONY MARKET
Monopsony can be defined as a situation where
there is a single buyers who is not in competition with
other buyers for the products which he purchases,
and in which the entry into the market by other
buyers is impossible.

22. FEATURES OF MONOPSONY MARKET
 Single buyers
 Large number of sellers
 Specialised product or input
 Lack of mobility
 Price-maker

25. OLIGOPOLY MARKET
Oligopoly is that form of market structure in which
there are a new firms selling a product so that there
is intense competition among them.

26. FEATURES OF OLIGOPOLY MARKET
 Profit maximization conditions
 Ability to set price
 Entry and exit
 Number of firms
 Long run profit
 Product differentiation
 Perfect knowledge
 Interdependence
 Non-price competition

28. EXAMPLES OF OLIGOPOLY MARKET
 OPEC (Oil and Petroleum exporting countries)
 Airlines
 Telecom industries

30. CROSS ELASTICITY OF DEMAND
The degree of responsiveness of quantity demanded
of one commodity to change in the price of another
commodity is called cross elasticity of demand.
FORMULA
Exy =Percentage change in quantity demand of commodity (X)
Percentage change in price of commodity (Y)

31. TYPES OF CROSS ELASTICITY OF
DEMAND
1) Positive cross elasticity (substitutes)
2) Negative cross elasticity (complementary)
3) Unrelated cross elasticity

32. POSITIVE CROSS PRICE ELASTICITY
Positive cross elasticity occurs when the formula
produce a result greater than 0. That means that
when the price of product X increases, the demand
for product Y also increases. Positive cross elasticity
is also know as cross elasticity of demand for
substitutes.
For example, McDonald’s may increase the price of
its product by 20 percent. In turn, customers would
prefer to go to Burger King as they may offer a
cheaper meal. Consequently, Burger King sees a rise
in demand of 10 percent.. This would suggest that
there is a positive relationship between the two.
XED>0

34. NEGATIVE CROSS PRICE ELASTICITY
Negative cross elasticity occurs when the formula
produces a result of less than 0. This means that
when the price of product X increases, the demand
for product Y decreases. In other words, consumers
see price rise of one product actually buy less of the
other product. This is also known as complementary
good.
Example – Pancakes and maple syrup.
XED<0

36. UNREALTED CROSS PRICE ELASTICITY
Unrelated cross price elasticity occurs when the
formula produces a result of exactly of exactly 0. This
means the price of product X can increase by 100
percent, but have no effect of demand for product Y.
When comparing the two products, they have no
relationship.
Example – We can compare two random products:
milk and iphones. If the price of milk was to increase
by 10 percent, it would have no impact on the
number of iphones sold.
XED=0

37. WHY IS CROSS PRICE ELASTICITY OF
DEMAND (XED) USEFUL?
Cross price elasticity of demand is useful because it
helps firms shape their strategies. To explain, they
can use cross-elasticity to establish a price at which
to sell their products. If there are no substitutes, or
there is little cross-elasticity with any other product,
the firm is able to set prices.

38. FACTORS
1) Identify complementary products  The firm can
potentially use such products to bundle together to
create extra demand. For example, most retailers
offer a play station bundle with games. They usually
offer a slight discount over buying them separately,
which can help stimulated demand.
2) Pricing strategy  The firm can see how consumers
respond to prices. If company A increases price and
sees the product of company B increase in demand;
it shows that it needs to consider this impact.
3) Organization strategy  Whether this occurs with
complementary products of substitutes; if the firm
can identify crucial areas, they may look to
integrate.