is any structure that allows buyers andsellers to exchange any type of goods, services andinformation. The exchange of goods or services for moneyis atransaction. Market participants consist of all the buyers and sellers of agoodwho influence itsprice. There are two roles in markets,buyersandsellers. The marketfacilitatestradeand enables the distribution andallocation of resourcesin a societySo it is an event or occasion, usually held at regular intervals, at which people meet for thepurpose of buying and selling merchandise. Means by which buyers and sellers are brought intocontact with each other and goods and services are exchanged. The term originally referred to aplace where products were bought and sold; today a market is any arena, however abstract or far-reaching, in which buyers and sellers make transactions.
) describes the state of amarketwith respect to competition.
Definitions and Features of Different Market Structure
Perfectly Competitive Market:
Perfectly competitive market describes a market in which there are many small firms, allproducinghomogeneousgoods. In general a perfectly competitive market is characterized bythe fact that no single firm has influence over the price of the product it sells. Because theconditions for perfect competition are very strict, there are few perfectly competitive markets.Perfect competition,in which the market consists of a very large number of firms producing ahomogeneous product. A perfectly competitive market may have several distinguishingcharacteristics, including: Infinite consumers with the willingness and ability to buy the productat a certain price, Infinite producers with the willingness and ability to supply the product at acertain price. It is relatively easy to enter or exit as a business in a perfectly competitive market.Prices and quality of products are assumed to be known to all consumers and producers.Buyers and sellers incur no costs in making an exchange. Firms aim to sell where marginalcosts meet marginal revenue, where they generate the most profit. The characteristics of anygiven market good or service do not vary across suppliers.Some examples of Perfectly competitive market :
Financial markets – stock exchange,currency markets, bond markets, Agriculture.Imperfect market falls in to three categories. They are briefly discussed bellowed.
Monopolistic competition is a commonmarket structurewhere many competing producers sellproducts that aredifferentiatedfrom one another (that is, the products aresubstitutes, but arenot exactly alike, similar to brand loyalty).The "founding father" of the theory of monopolisticcompetition wasEdward Hastings Chamberlin. Monopolistically competitive markets have thecharacteristics: There are many producers and many consumers in a given market, and nobusiness has total control over the market price. Consumers perceive that there are non-pricedifferences among the competitors' products. There are fewbarriers to entryand exit.Producers have a degree of control over price. A firm making profits in the short run willbreakevenin the long run because demand will decrease and average total cost will increase. Thismeans in the long run, a monopolistically competitive firm will make zeroeconomic profit.Thisgives the amount of influence over the market; because of brand loyalty, it can raise its priceswithout losing all of its customers. This means that an individual firm's demand curve isdownward sloping, in contrast to perfect competition, which has aperfectly elasticdemandschedule.Monopolistic competition,also called competitive market, where there are a largenumber of independent firms which have a very small proportion of the market share.