What is Market Structure?
Characteristics of Perfect Competition
 Market structure refers to the nature
and degree of competition in the
market for goods and services. The
structures of market both for goods
market and service (factor) market are
determined by the nature of
competition prevailing in a particular
market.
 Those characteristics of the market that
significantly affect the behavior and
interaction of buyers and sellers.
Things To Be Considered
 types of goods and services being
trade;
 the number and size of buyers and
sellers in the market; and
 the degree to which information can
flow freely.
There are two types of Market
Structures;
 Perfect or Pure Market
Is a market situation which consists
of a very large number of buyers and
sellers offering a homogeneous product.
Under such condition, no firm can affect the
market price. Price is dertermined through
the market demand and supply of the
particular product, since no single buyer or
seller has any real control over price.
 Imperfect Market
Is a market situation wherein the
conditions necessary for perfect
competitions are not satisfied. Under this
situation, there are few sellers which are
enough to affect the market price.
Perfect Competition
The Perfect Competition is a market
structure where a large number of buyers
and sellers are present, and all are
engaged in the buying and selling of the
homogeneous products at a single price
prevailing in the market.
 Large number of buyers and sellers
In perfect competition, the buyers
and sellers are large enough, that no
individual can influence the price and the
output of the industry.
 Homogeneous product
The homogeneous goods are perfect
substitutes for each other and are generally
sold in perfect competition. The seller
competes on either price or availability. In
perfect competition many buyers and many
sellers are present so the profit margins are
very less. Price is the most important factor
along which the firms producing
homogeneous goods compete.
 No Transaction cost
There is an absence of
transportation cost, i.e. incurred in
carrying the goods from one market to
another.
 Easy entry and exit
Under the perfect competition, the
firms are free to enter or exit the
industry.
 Price Takers
A price taker is a person or company
that has no control to dictate prices for
a good or service.
Monopoly
 Monopoly comes from the Greek word
“monos” which means ‘one’ and ‘polien’
to ‘sell’.
 Monopoly is a market situation in which
there is only one seller of a product with
barriers to entry of others.
 The product has no close substitutes.
The cross elasticity of demand with
every other product is very low. This
means that no other firms produce a
similar product.
 It controls the total supply of raw
materials in the industry and has
control over price.
 It owns a patent or copyright.
 Its operations are under economics of
scale.
Characteristic of Monopoly
 Single Seller
In a monopoly market, there is only
one firm producing and selling a product.
This single firm constitutes the industry as
there is no distinction between firm and
industry.
 No Close Substitutes
This market sells a product which has
no close substitute.
 Price Maker
Able to fix their own price.
 Blocked Entry
There are strong barriers to entry to
this market. It could be economic,
institutional or legal. Entry is almost
blocked.
 Non-price Competition
 Availability of information
(Imperfect)
Current Monopoly
 Natural Monopoly
A market that runs most efficiently
when one firm supplies all of the output.
Example: electric utilities, water for your
home, garbage collection
 Local Monopoly
For various reasons there are no other
competitors in a geographic area
Example: only gas station in a small town
Oligopoly
 Comes from the greek word oligo which
means ‘few’ and polien which means ‘to
sell’.
 Oligopoly is a market situation in which
there are few firms producing either
differential goods or closely differential
goods. The number of firms is so small
that every seller is affected by the
activities of the others.
 Oligopoly is a market situations in
which there are few (more than two)
sellers of a commodity such that actions
of every seller has predictable effect on
the other sellers/rivals.
• Hence, oligopoly is also called
competition amongst the few.
Features of Oligopoly Market
 Few Sellers:
Under the Oligopoly market, the
sellers are few, and the customers are
many.
 Interdependence:
It is one of the most important
features of an Oligopoly market,
wherein, the seller has to be cautious
with respect to any action taken by the
competing firms.
 Advertising:
Under Oligopoly market, every firm
advertises their products on a frequent
basis, with the intention to reach more
and more customers and increase their
customer base.
 Competition:
It is genuine that with a few players
in the market, there will be an intense
competition among the sellers.
 Entry and Exit Barriers:
The firms can easily exit the
industry whenever it wants, but has to
face certain barriers to entering into it.
 Lack of Uniformity:
There is a lack of uniformity among
the firms in terms of their size, some
are big, and some are small.
Types of Oligopoly
 Pure Oligopoly
This oligopoly is common in market
situation where the products sold are fairly
homogeneous.
example: sugar, cement and other raw
material
 Differentiated Oligopoly
 Value characteristic or qualities of
goods vary.
example:Telecommunication(globe,smart,
sun)
 Duopoly
Only two producers exist in a given
market.
Example: Pepsi and Coca cola
Monopolistic Competition
 It is that form of market in which there
are large numbers of sellers selling
differentiated products which are
similar in nature but not homogenous,
for e.g.., the different brands of soap.
 This are closely related goods with a
little difference in odour, size and
shape. We separate them from each
other.
 The concept of monopolistic
competition was developed by an
American economist “Chamberline”. It
is a combination of perfect competition
and monopoly.
 Monopolistic competition is a market
situation in which both monopoly and
competitive elements are present.
 The most distinguished features of
monopolistic competition which makes
it a blending of competition and
monopoly is product differentiation.
 Product differentiation refers to the
actively created differences in products
with respect to brand, trademark,
design, packing, colour, size,
measurement, weight such that though
the products are similar, they are not
identical or in other words the products
are different but closely related.
Monopolistic competition features
Large number of sellers and buyers :
In monopolistic competition the
number of sellers is large and each other
act independently without any mutual
dependence.
Product Differentiation :
Most of the firms under
monopolistic sale products which are not
homogenous in nature but are close
substitutes.
Products are differentiated from each
other in the following ways:
(a) Real Differentiation :
These types of product
differentiation arises due to differences in
the quality of inputs used in making these
products, differences in location of firms
and their sales service.
(b) Artificial Differentiation :
It is made by the sellers in the
minds of the buyers of those products
through advertisements, attractive
packing, etc.
Non-price Competition :
In this case, different firms may
compete with each other by spending a
huge sum of money on advertisements
keeping the product prices unchanged.
Selling Cost :
Expenditure incurred on
advertisements and sales promotion by a
firm to promote the sale of its product is
called selling cost. They are made to
persuade a particular product in preference
to other products. Some advertisements
have become so popular that people use a
brand name to describe the product.
example: brand name is used to describe
all types of sneakers
Monopsony
Monopsony refers to a market situation
when there is a single buyer of a
commodity or service. It applies to any
situation in which there is a ‘monopoly’
element in buying. Since there is only one
buyer, this market has the control of
supply and it can reduce the number of
input demanded in order to decrease the
price of that particular input.
 Monopsony gives the firm the ability to Government: Parliamentary System,
control its unit cost for an input which is Constitutional Monarchy, Unitary State
similar to the way the monopoly controls its Prime Minister: Boris Johnson {Head of
price. Government}
Head of state: Queen Elizabeth ll
For example, when consumers of a Trade Organization:
certain commodity are organised or when 1. European Union
a certain individual happens to have a taste 2. Berkshire Country Network
for some commodity which no one else 3. Organization for Economic Co-
requires, or when a single big factory in an operation and development
isolated locality is the sole buyer of some 4. World Trade Organization
grades of labour, there is monopsony. Labor Force {by occupation}:
Example: Government {in military Agriculture- 1.4%
Pocurement}, Electricity generators Industry- 8%
Services- 90.6%
Oligopsony Unemployment- 4.3%
- An Oligopsony is a market form in which Average net salary:
the number of buyers is small while the £ 2,749 / $ 3,712 monthly /
number of sellers in theaory could be ₱173508
large. Main Industries in UK:
- This typically happens in market for 1. Aerospace
inputs where a small number of firms are 2. Automobile
competing to obtain factors of production. 3. Business and Professional
- In contrasts with an oligopoly, where Services
there are many buyers but just a few 4. Chemicals
sellers. 5. Construction
- An oligopsony is a form of imperfect GDP Rank:
competition. 7th {nominal}
Example: 8th {PPP}
The three buyers of cocoa bean GDP: $ 2,829 Trillion {nominal, 2019}
 Three firms buy the vast majority $ 3,128 Trillion {PPP, 2018}
of world cocoa bean production, GDP per Capita:
mostly from small farmers in third $ 44,118 {nominal, 2019}
world countries. {Cargill, ADM, $ 45,643 {PPP, 2018}
CALLEBAUT} GDP by Sector:
Tobacco in U.S. Agriculture- 0.7%
 Three companies {Altria, Brown Construction- 6.3%
and Williamson, and Lorillard Production- 15.2%
Tobacco company} buy almost Services- 77.8%
90% of all tobacco grown in the
U.S. Imports and Exports

United Kingdom Exports:

$ 813.2 Billion
Capital city: London Main Export Partners:
Currency: Pound Sterling 1. Germany- 11.3%
Population: 64,105,654 2. United States- 10.5%
Religion: Christian- 59.5% 3. Netherlands- 8.8%
Muslim- 4.4% 4. France- 7.4%
Hindu- 1.3%
5. Ireland- 6.2%
Non-religious- 25.7%
6. Belgium- 5.1%
Other/Unknown- 9.1%
Export Products:
 1. Cars- 12%
2. Gas Turbines- 3.5%
3. Package Medicaments- 5.2%
4. Gold- 4%
5. Crude Petroleum- 3.4%
6. Hard Liquor- 2.1%

Imports:
$ 782.5 Billion
Main Imports Partners:
1. Germany- 12.6%
2. China- 8%
3. Netherlands- 7.5%
4. United States- 6.7%
5. France- 5.4%
6. Belgium- 4.4%

Import products:
1. Gold- 8.2%
2. Package Medicaments- 3.1%
3. Cars- 7.8%
4. Vehicle parts- 2.5%

Tourism in the United Kingdom:

 world's 6th biggest tourist
destination
 over 40 million visiting in 2018
 US$31.93 billion was spent in the
UK by foreign tourists in 2017

Most visited historic sites:

1. Tower of London
2. St Paul’s Cathedral
3. Westminster Abbey
4. Roman Baths
5. Canterbury Cathedral
6. Stonehenge in Amesbury
7. Palace of westminster