Market structure

1. Lec. No. 11
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Market structure and Price
determination under Perfect and
Imperfect competition
Dr. M. Umamageswari
Assistant Professor (Agricultural Economics)
JSA College of Agriculture & Technology
(Affiliated to Tamil Nadu Agricultural
University)
Ma. Podaiyur, Tittagudi Tk. ,
Cuddalore District – 606 108

2. What is a Market?
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 Market is defined as a place or point at which
buyers and sellers negotiate their exchange of
well-defined products or services.
 Market is a place where buyer and seller meet,
goods and services are offered for the sale and
transfer of ownership occurs

3. Definition of Market
 Market is any area over which buyers and
sellers are in close touch with one another,
either directly or through dealers, that the price
obtainable in one part of the market affects the
prices paid in other parts. – Prof. Benham
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Chandi Chowk , Delhi

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Laad Bazaar or Choodi Bazaar is a very old market
popular for bangles located in Hyderabad, India.

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Khwairaman Bazar / Ima
Keithal is the main market
of Imphal, capital of the state
of Manipur in India. The main
feature of this market is that all its
shops are owned and operated by
women.

8. COMPONENTS OF MARKET
 As seen from the definition of market, the
components of a market are:
1. Sellers (Producer)
2. Buyers (Customers)
3. Nature of product (Types of Product)
4. Conditions of entry and exit
5. Negotiation (Price)
6. Transfer of Ownership and Product
7. Transfer of Money or Equal Value8

9. COMPETITIVE BASED MARKET
STRUCTURE
The less the power an individual firm has to
influence the market in which it operates, the
more competitive that market is.
Types of Competition
I. Perfect Competition Markets
II. Imperfect Competition Markets
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10. Market Structures Based on
Competition
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11. PERFECT COMPETITION MARKET
 A market structure in which all firms in an
industry are price takers and in which there is
freedom of entry into and exit from the industry
is called Perfect Competition.
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12. FEATURES OF PERFECT
COMPETITON MARKET
 A Large Number of Buyers and Sellers
 Price Taker (market price)
 Homogeneous Products (same product)
 The firms are Free to Entry or Exit
 No Individual Preferences (buyer/seller)
 Each buyer and seller operates under the
conditions of certainty
 Mobility of Factors of Production – move freely
from industry to industry and firm to firm12

13. IMPERFECT COMPETITION
 Monopoly Market
 Monopolistic Market
 Duopoly Market
 Oligopoly Market
 Monopsony Market
 Duopsony Market
 Oligopsony Market
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14. MONOPOLY
 A pure monopoly exists if one and only one
firm produces and sells a particular commodity
in the market. The single firm producing the
product is itself both the firm and the industry.
 E.g.: Railways, BMTC in Bangalore , Electricity, BSNL
(Landline) , Oil marketing companies IOCL, HPCL,
BPCL ..
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BMTC has monopoly in
operating road based
public transport services
in Bangalore. No-one is
allowed to operate buses
to carry general public in
Bangalore.

15. FEATURES OF MONOPOLY
COMPETITIVE MARKET
 Only one firm sells the commodity having no
rivals or direct competition
 Price Maker
 Indirect rivalry may exist in the form of
Existence of substitute products
 No other seller can enter the market, else
monopoly would cease to exist.
 The product is distinct
i.e., inelastic demand15

16. CAUSES OF MONOPOLY
 Patent Rights give legal monopoly
 Govt. policies such as granting licenses
 Ownership and control of some strategic raw
materials.
 Exclusive knowledge of technology by the firm.
 Size of the market may accommodate only a
single firm
 Limit pricing policy adopted to prevent new
entrants.
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The 24-day march lasted from 12 March 1930 to 6 April 1930 as
a direct action campaign of tax resistance and nonviolent
protest against the British salt monopoly.

18. MONOPOLISTIC
COMPETITION
 Monopolistic Competition refers to a situation
where there are many sellers of a differentiated
product.
 There is competition which is not perfect,
between many firms making very similar
products which are close but not perfect
substitutes.
 Monopolistic market exhibits characteristic of
both perfect competition and monopoly
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19. FEATURES OF MONOPOLISTIC
COMPETITION
1. Large number of sellers/producers
2. Large number of buyers
3. Product Differentiation (Tooth paste)
4. Higher selling cost (Promotion cost)
5. Imperfect knowledge (Buyers)
6. Freedom of entry and exist
7. Higher elasticity of demand. (Price sensitivity
market)
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20. MONOPOLISTIC COMPETITION
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21. Duopoly
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22. Examples
Duopoly
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23. OLIGOPOLY
 Oligopoly is a market structure with a small
number of firms, none of which can keep the
others from having significant influence.
 The concentration ratio measures
the market share of the largest firms.
 A monopoly is one firm, duopoly is two firms
and oligopoly is two or more firms
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24. Features of Oligopoly
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Example : The music entertainment industry is
dominated by Universal Music Group, Sony, BMG,
Warner and EMI Group.

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