market and forms of market

1. MARKET STRUCTURES
Submitted by:-
Meenal Gupta
827
MBA 1st yr
Submitted to:-
Ajay samyal

2. What Are Markets?
A market is where buyers and sellers:
meet to exchange goods and services.
are affected by some level of competition.
The market may be in one specific place
or
It does not exist physically at all

3. Markets are classified by 4 structures
1. Pure (perfect) Competition
2. Monopolistic Competition
3. Oligopoly
4. Monopoly
Forms of Markets?

4. A firm is a price taker, not a price
maker.
1. Perfect Competition
It is a form of market where there is a
large number of buyers and sellers of
a commodity.

6. Features of perfect competition
• LARGE number of SMALL buyers and sellers.
• No single buyer or seller can influence the price.
• No product differences. (EXAMPLES: Salt, Flour,
Commodity, Corn)
• Perfect knowledge.
• No Barriers to Entry.
• Same price.
• Perfect mobility.

7. Price determination under perfect
competition
Market supply of
chocolates
Price per unit
(Rs)
Market demand for
chocolates
100 10 20
80 8 40
60 6 60
40 4 80
20 2 100
Equilibrium price of a commodity is determined at the
point where market demand is equal to its market supply.

8. Perfect Competition

9. Perfect Competition
Price is determined at the point where market's
demand curve intersects market's suppy curve.

10. Price determination of short-run
equilibrium of the firm
l Super normal profits
l Normal profits
l Minimum losses

11. Super normal profits
AR > AC

12. Normal profits
AR = AC

13. Minimum losses
AR < AC

14. Monopoly competition
Monopoly is a price maker.
l Monopoly is a form of the market in
which there is a single seller or
producer of a commodity.
l It has a complete control over price
and can also practice price
discrimination.

15. Examples of Monopolies
EXAMPLE: Only
person selling
water in the
desert.

16. Features of Monopoly
There is a single seller
No close substitute goods are available
High Barriers to Entry
Full control over price
Price discrimination.

17. l Short term
u Super normal profits
u Normal profits
u Minimum losses
l Long term
Price determination under Monopoly

18. AR >AC
Super normal profits

19. AR = AC
Normal profits

20. AR >AC
Minimum loss

21. AR > LAC
Long -run equilibrium

22. Monopolistic competition
It is a form of the market in which there are many
sellers of the product , but the product of each
seller is somewhat different from other.
There are many sellers , selling a differentiated
product.
It exercise partial control over price.

23. Examples of Monopolistic Competition
Auto, Steel, Gas, Fast Food, Airlines.

24. 1) LARGE number of large companies
Sellers can influence the price through creating a product identity
1) Products are NOT exactly identical, BUT VERY SIMILAR, so
companies use PRODUCT DIFFERENTIATION .
2) Heavy Competition: Firms must remain aware of their
competitor’s actions, but they each have some ability to
control their own prices.
3) Low Barriers to Entry.
4) Monopolistic competition takes its name and its structure
from elements of monopoly and perfect competition.
Feature's of Monopolistic
Competition

25. Price determination under
monopolistic competition
lShort-run equilibrium ( same as
monopoly )
uSuper normal profits
uNormal profits
uMinimum losses
lLong-run equilibrium

26. Long-run equilibrium
AR > LAC

27. What is an Oligopoly?
A market in which a two-three large sellers control
most of the production of a good or service and they
work together on setting prices.
Features of an Oligopoly
1)Very few Sellers that control the entire market.
2)Products may be differentiated or identical (but
they are usually standardized)
3)Medium barriers to entry: Difficult to Enter the
market because the competitors work together to
control all the resources & prices.
4)The actions of one affects all the producers.
5)Collusion = an agreement to act together or
behave in a cooperative manner.

28. 2 Types of Price Behavior in an Oligopoly
Independent Pricing: policy by a competitor that
ignores other producer’s prices.
Price Leader: independent pricing decisions made by
a dominate firm on a regular basis that results in
generally uniform industry-wide prices.
DISADVANTAGE: other firms shut you down by
agreeing to set lower prices than yours.
ADVANTAGE: you are the company leading the price.

29. Sweezy's kinky Demand
Curve
Based on following assumptions:
l 1 firm reduces its price other firms also
reduces its price.
l 1 firm increases its price, other firms will
not follow price increase.
l There is established prevailing price.
l MCC will pass through the dotted portion
of MRC.

31. Markets work best when three conditions are
met:
Adequate competition must exist in all
markets.
Buyers and sellers are reasonably well-
informed about conditions and
opportunities.
Resources must be free to move from one
industry to another.
Market Failure occurs when any of the 3
conditions alter significantly.
3 Conditions of Efficient & Successful
Markets

32. References
l https://www.google.co.in/url?sa=t&so
urce=web&rct=j&url=https://d3jc3ahdj
ad7x7.cloudfront.
l T.R Jain and V.K Ohri,
microeconomics and
macroeconomics, 2012-2013
,chapter- 11,12.
l T.R Jain and O.P Khanna ,
managerial economics, 2011-2012,

33. THANK YOU