Credit to Mr. Hamideen

1. Market Analysis

2. Market
 A place where goods bought and sold.
 In economics, market determines :
 Who the buyers and sellers are
 What price will be
 What quantities will be bought and sold.

3. Market Elements
 The place where the commodity is traded it can
be a certain city, a region, a country or even the
entire world.
 Free communication between the buyers and
sellers.
 Government policies about liberalization, price
control, taxes, subsidies, foreign trade policies.

4.  The existence of competition among the
sellers, as a result of an increase a number
of sellers.
 The competition among the buyers raises the
price, while the competition among the sellers
results in fall in the prices.
 The closer the substitute is available for a product,
the greater is the competition in the market.

5. Market Behaviour
 Behaviour refers to the objectives of the
market players. (Buyer and sellers)
 Buyer’s objective is to get the best (quality
and quantity wise) product within given
budget.
 Seller’s objective is to maximize profit to
minimum level of sale.

6. Market Mechanism
 Market mechanism is based on two forces:
 Demand and Supply
 Demand and supply forces works in opposite
direction bringing the market players to a
bargain point , wherein both (demand and
supply) together intersects each other at given
price. (Equilibrium Price.)

7. PRICE DETERMINATION IN
MARKETS
The market demand curve shows the
amount demanded at every price.
The market supply curve shows the
amount supplied at every price.

8. Excess demand = QD - QS
Market for tacos
supply
demand
price
quantity
p = $1
QDQS
EXCESS DEMANDEXCESS DEMAND
Excess demand exists when, at the current price, the
quantity demanded is greater than quantity supplied

9. Excess supply = Qs - QD
Market for tacos
supply
demand
price
quantity
p = $3
QD QS
EXCESS SUPPLYEXCESS SUPPLY
Excess supply exists when, at the current price, the
quantity supplied is greater than the quantity demanded.

10. Market for tacos
supply
demand
price
quantity
p = $2
QD QS
Equilibrium Price: S = D
EQUILIBRIUM PRICE
DEFINED

11. Market Intervention
 When free market operations inflate prices,
government fix ceiling price.
 Government also fixes ‘quota’ of items to be
distributed through the fair price shops under
public distribution system to meet shortage.

12.  Government also subsidized the
production of merit goods.
 On the other hand, the production and
consumption of non-merit goods is
discouraged by imposing taxes.
 Government may initiate buffer stock
operations to control fluctuation in market
price.

13. Market Structure
 Market structure is broadly based on degree
of competition, type of product, entry
barriers in the market. It is divided into two
forms:
 Perfect Competition (Many sellers)
 Imperfect Competition (Few or one seller)

14. Perfect Competition
 Large number of sellers
 Size of market for each firm is very small
 Seller is price taker not price maker
 Homogeneous Product
 Free Entry and Exit of the firms
 Absence of Government Regulation
 Perfect mobility of factors of production
 Perfect Knowledge
 Absence of transportation and selling costs
 Price elasticity of demand for individual firm is
infinite.

15. Imperfect Competition
 This market structure is based on following
forms:
 Monopoly
 Monopolistic
 Oligopoly

16. Monopoly
 One Seller in the market
 Size of market for the seller is very large
 Seller is price maker
 Price of product is very high
 Product is unique with no close substitute
 Strong barriers to Entry
 Price elasticity of demand for individual firm is
very low

17. Monopolistic
 Many sellers
 Differentiated product but with close
substitute
 Entry barriers are free
 Size of market for each firm is small
 Price elasticity of demand for firm is high
 Moderately high price

18. Oligopoly
 Few sellers or firms in the market
 Product is differentiated and
homogeneous also
 Entry barriers because of few firms or due
to product differentiated
 Size of market for the firm is large
 Price of the product is high
 Price elasticity of demand for individual
firm low