1) The document discusses different types of market systems including monopoly, oligopoly, monopolistic competition, perfect competition, and monopsony. 2) A monopoly is characterized by a single seller, while an oligopoly has a small number of dominant sellers. Monopolistic competition involves differentiated products. 3) Perfect competition assumes many buyers and sellers such that no individual participant can influence the market price. A monopsony has a single buyer who can influence the price paid to suppliers.

1. Sarvajanik College Of
Engineering & Technology
Name Patel Binjal HarishbhaiPatel Binjal Harishbhai
Branch Electrical(M)Electrical(M)
Sem. 33rdrd
Year 2016-172016-17
Topic Types of Markets and TheirTypes of Markets and Their
CharacteristicsCharacteristics

2. Content :

Preface

systems of Markets
 Monopoly
 Oligopoly
 Monopsony
 Monopolistic Competition
 Perfect Competition

3. Preface:

In market economies, there are a variety of different
market systems that exist, depending on the industry
and the companies within that industry.

It is important for small business owners to understand
what type of market system they are operating in when
making pricing and production decisions, or when
determining whether to enter or leave a particular
industry.

4. Monopoly:

A monopoly is the exact opposite form of
market system as perfect competition.

In a pure monopoly, there is only one producer
of a particular good or service, and generally no
reasonable substitute.

In such a market system, the monopolist is able
to charge whatever price they wish due to the
absence of competition, but their overall
revenue will be limited by the ability or
willingness of customers to pay their price.

5. Characteristics of
Monopolicity market
1.) Product differentiation:
− MC firms sell products that have real or perceived non-price
differences. However, the differences are not so great as to
eliminate other goods as substitutes.
− Technically, the cross price elasticity of demand between goods in
such a market is positive.
− The goods perform the same basic functions but have differences
in qualities such as type, style, quality, reputation, appearance,
and location that tend to distinguish them from each other.
− For example, the basic function of motor vehicles is the same to
move people and objects from point to point in reasonable comfort
and safety. Yet there are many different types of motor vehicles
such as motor scooters, motor cycles, trucks and cars, and many
variations even within these categories.

6. 2.)Many firms

There are many firms in each MC product group and many
firms on the side lines prepared to enter the market.

A product group is a "collection of similar products".

The fact that there are "many firms" gives each MC firm the
freedom to set prices without engaging in strategic decision
making regarding the prices of other firms and each firm's
actions have a negligible impact on the market.

For example, a firm could cut prices and increase sales without
fear that its actions will prompt retaliatory responses from
competitors.

7. 3.)No entry and exit costs

In the long run there are no entry and exit costs.

There are numerous firms waiting to enter the market,
each with their own "unique" product or in pursuit of
positive profits.

Any firm unable to cover its costs can leave the market
without incurring liquidation costs.

This assumption implies that there are low start up
costs, no sunk costs and no exit costs.

8. 4.)Independent decision
making

Each MC firm independently sets the terms of exchange for its
product.

The firm gives no consideration to what effect its decision may
have on competitors.

The theory is that any action will have such a negligible effect
on the overall market demand that an MC firm can act without
fear of prompting heightened competition.

In other words, each firm feels free to set prices as if it were a
monopoly rather than an oligopoly.

9. Monopolistic Competition

Monopolistic competition is a type of market system combining elements of a
monopoly and perfect competition.

Like a perfectly competitive market system, there are numerous competitors
in the market.

The difference is that each competitor is sufficiently differentiated from the
others that some can charge greater prices than a perfectly competitive firm.

An example of monopolistic competition is the market for music.

While there are many artists, each artist is different and is not perfectly
substitutible with another artist.

Market systems are not only differentiated according to the number of
suppliers in the market.

They may also be differentiated according to the number of buyers.

Whereas a perfectly competitive market theoretically has an infinite number
of buyers and sellers, a monopsony has only one buyer for a particular good
or service, giving that buyer significant power in determining the price of the
products produced.

10. Oligopoly:

An oligopoly is similar in many ways to a monopoly.

The primary difference is that rather than having only one
producer of a good or service, there are a handful of
producers, or at least a handful of producers that make up
a dominant majority of the production in the market
system.

While oligopolists do not have the same pricing power as
monopolists, it is possible, without diligent government
regulation, that oligopolists will collude with one another to
set prices in the same way a monopolist would.

11. Characteristics of Oligopoly

Few sellers offering similar or identical products

Interdependent firms

Non-Price Competition
1.)MARKETS WITH ONLY A FEW
SELLERS

Because of the few sellers, the key feature of oligopoly is the tension between
cooperationand self-interest.

12. 2.)Interdependence:

Firms under oligopoly are interdependent.
Interdependence means that actions of one
firm affect the actions of other firms.

A firm considers the action and reaction of the
rival firms while determining its price and output
levels.

A change in output or price by one firm evokes
reaction from other firms operating in the
market.

For example, market for cars in India is
dominated by few firms (Maruti, Tata, Hyundai,

13. 3.)Non-Price Competition:

Under oligopoly, firms are in a position to
influence the prices.

However, they try to avoid price competition for
the fear of price war. They follow the policy of
price rigidity. Price rigidity refers to a situation in
which price tends to stay fixed irrespective of
changes in demand and supply conditions.

Firms use other methods like advertising, better
services to customers, etc. to compete with
each other.

If a firm tries to reduce the price, the rivals will

14. Monopsony

Market systems are not only differentiated according
to the number of suppliers in the market.

They may also be differentiated according to the
number of buyers.

Whereas a perfectly competitive market theoretically
has an infinite number of buyers and sellers, a
monopsony has only one buyer for a particular good or
service, giving that buyer significant power in
determining the price of the products produced.

15. Characteristics/Features
of Monopsony:

Monopsony in the labor market, is said to exist
when there is a single buyer of labor. The main
characteristics of monopsony are as under:
 (i) The firm or employer hires a large portion of the
total employment of a certain type of labor.
 (ii) The mobility of labor is very much limited either
geographically or in terms of skills of offer.
 (iii) The monopnist faces imperfect competition in
the labor market but perfect competition in the
product market.
 (iv) The single buyer faces a large number of
workers who are unorganized or non-unionized.

16. Perfect Competition

Perfect competition is a market system
characterized by many different buyers and
sellers.

In the classic theoretical definition of perfect
competition, there are an infinite number of
buyers and sellers.

With so many market players, it is impossible
for any one participant to alter the prevailing
price in the market.

If they attempt to do so, buyers and sellers
have infinite alternatives to pursue.