GOVERNMENT PROPERTY

NOT FORDEPARTMENT
SALE OF EDUCATION
REGION III
Schools Division of Cabanatuan City
Maharlika Highway, Cabanatuan City

Market Structures

Applied Economics

Writer: Abrey Lynn A. Narciso, Eastern Cabu National High School

12
Illustrator: Abrey Lynn A. Narciso, Eastern Cabu National High School
SELF-LEARNING MODULE
Layouter: Abrey Lynn A. Narciso, Eastern Cabu National High School

Project EL AR:
SHS
Enhance Learning
thru Adequate Resources
 OBJECTIVES

To You, Learner:
Welcome to (Applied Economics Grade 12) Self-Learning Module (SLM) on Market Structure!
1.ThisDescribe
module the
wascharacteristics and distinguish
made to give you with fun andthe features oftime
meaningful the market structures
for guided and independent learning at
2.your
Understand the differences between each type of market structure
convenience. You will be able to process the contents of this Module while being an active learner.
3. Differentiate the different factors that affects competition in the market
4. Give To ownYou, Parent/s,
opinion how Guardian/s
to become aand Learning
wise buyer Facilitator/s:
This Module was collaboratively developed and reviewed by the teachers, school heads and
supervisors of DepEd Division of Cabanatuan City to assist you in helping the learners meet the standards
set by the K to 12 Curriculum while overcoming their different constraints in schooling. As a facilitator,
you are expected to orient the learners on how to use this module. You also need to keep track of the
learners' progress while allowing them to manage their own learning. Furthermore, you are expected to
encourage and assist the learners as they do the tasks included in the module.
This Module is about the characteristics and features of the market structure and its various kinds
which was differentiated in terms of number of sellers, types of products, entry/exit to market and pricing
power. COMPETENCY

Differentiate various market structures in terms of:

a. number of sellers
b. types of products
c. entry/exit to market
d. pricing power
e. others

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 WHAT DO YOU ALREADY KNOW?

Pre-Test
Read each item carefully. Choose the correct answer and write its letter on
the space provided before each number.
1. The place where people buy fresh foods.
A. Market B. Hardware C. Sari-sari Store D. Department Store

2. Sellers usually have different styles in selling their goods to attract buyers
A. Market B. Demand C. Supply D. Competition

3. This situation exists when a single firm that sells in the market has no close substitutes
A. Competition B. Demand C. Supply D. Monopoly

4. A right granted to an inventor by the federal government that permits the inventor to
exclude other from making selling or using the invention (of whom) for a period of time
A. Copyright B. Patent C. MonopolisticD. Competition

5. An intellectual property right that protects the creator or owner of original expressive work
A. Patent B. Copyright C. Competition D. Demand

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 WHAT YOU NEED TO KNOW

After looking at the basic principles of demand and supply, it will also be helpful to learn about the
market structures in which sellers can operate. Each structure will be described in terms of the nature of the
product being sold, the number of buyers and sellers in the market, and the ease of entering or exiting the
market. Market Structure refers to the competitive environment in which buyers and sellers operate.
Competition is rivalry among various sellers in the market. As students, we are familiar with the
word competition. We are exposed to competition in school: spelling bees, quiz bees, and sports fests. On
the television, we watch beautiful girls from all over the world compete for the Miss Universe or Miss
World title. We see how the various teams of the PBA compete to win the championship.
The Market is a situation of diffused, impersonal competition among sellers who compete to sell
their goods and among buyers who use their purchasing power to acquire the available goods in the market.
There are varying degrees of competition in the market depending on the following factors:
 Number and size of buyers and sellers
 Similarity or type of product bought and sold
 Degree of mobility of resources
 Entry and exit of firms and input owners
 Degree of knowledge of economic agents regarding prices, costs, demand, and supply conditions.

PERFECT COMPETITION
As the term suggests, perfect competition implies an ideal situation for the buyers and sellers.

Characteristics of Perfect Competition

1. Homogeneous goods. All firms sell an identical product. Consumers view the products of various
firms as the same, hence, are different between them.
2. Perfect information. Buyers and sellers have all relevant information about the market including the
price and quality of the product.
3. Price taking. Buyers and sellers cannot individually influence the price at which the product can be
purchased or sold. Price is determined by the market, so each buyer takes the price as given.
4. No transaction costs. Neither buyers nor sellers incur costs or fees to participate in the market.

5. Free entry and exit. Firms can enter and exit the industry quickly at any time without having to incur
any special expense. That is, firms do not face barriers to entry and exit.

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 In this market, there are large numbers of buyers and sellers. Sellers offer a standardized product, a
homogeneous good that is not different from the others in the market. The sellers can easily enter into or
exit from the market as there are no barriers to entry and exit from the industry. The buyers and sellers are
well informed about prices and sources of the goods.
IMPERFECT COMPETITION
In other markets, one or more of the assumptions of perfect competition will not be met; thus, the
market becomes imperfectly competitive.
We shall discuss the different types of imperfectly competitive market, which are monopoly,
monopolistic competition and oligopoly.
Monopoly
A monopoly exists when a single firm that sells in the market has no close substitutes. The
existence of a monopoly depends on how easy it is for consumers to substitute the products for those of
other sellers.
Examples: Meralco, PLDT,
Monopoly can exist for the following reasons:
1. A single seller has control of entire supply of raw materials
2. Ownership of patent or copyright is invented in a single seller
3. The producer will enjoy economies of scale, which are savings from a large range of outputs
4. Grant a government franchise to a single firm.
Patent is a right granted to an inventor by the federal government that permits the inventor to
exclude other from making selling or using the invention for a period of time.
Copyright is an intellectual property right that protects the creator or owner of original expressive
work.
While a monopoly enjoys a lot of power in the market, it actually does not have unlimited market
power because it faces indirect competition for consumers’ money for all goods.
Monopolistic Competition
One imperfectly competitive market is monopolistic competition wherein products are
differentiated and entry and exit are easy. Monopolistic competition allows such variety of choices. Since
many firms exist in the market consumers also have a freedom to choose from whom to buy the good.
Examples: clothing shops, gas station, grocery stores, athletic wear, fast food restaurant, pet foods

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 Characteristics of Monopolistic competition
1. A blend of competition and monopoly;
2. Firms sell differentiated products, which are highly substitutable but are not perfect substitutes;
3. Many sellers offer heterogeneous or differentiated products, similar but not identical and satisfy the same
basic need;
4. Changes in products characteristics to increase appeal using brand , flavor, consistency, and packaging
as means to attract customers;
5. There is free entry and exit in the market that enables the existence of many sellers;
6. It is similar to a monopoly in that the firm can determine characteristics of product and has some control
over price and quantity.
The firm tends therefore to engage in non-price competition. This refers to any action a firm takes
to shift the demand curve for its output to the right without having to sacrifice its prices. This may include
better service, product guarantees, free home delivery, more attractive packaging, better locations and
advertising. The firm can either sell more by charging a lower price or it can even raise its price without
losing all of its customers because it has the capacity of developing loyalty among its customers.
Oligopoly
An oligopoly is a market dominated by a small number of strategically interacting firms. Few
sellers account for most of or total production since barriers to free entry make it difficult for new firms to
enter.
Example: Caltex, Shell, Petron, Nestle, Pepsi, Kraft, Hersheys
Characteristic of Oligopoly
1. Action of each firm affects other firms
2. Interdependence among firms
These strategically interacting firms try to raise their profits by colluding with each other to raise
prices to the detriment of consumers.
Oligopolies may exist due to the existence of barriers, which may include economies of scale,
reputation of the sellers, and strategic and legal barriers such as the grant of patents/franchises, loyal
following of customers, huge capital investments and specialized input, and control of supply of raw
materials by a few producers

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 WHAT HAVE YOU LEARNED?

Post-Test
Read each item carefully. Choose the correct answer and write its letter on
the space provided before each number.

1. A blend of competition and monopoly is called

A. Monopolistic competition C. Imperfect competition
B. Oligopoly D. Perfect competition
ENRICHMENT ACTIVITY 1
2. When a single seller has control of entire supply of raw materials
A. Competition B. Oligopoly C. Monopoly D. Market

3. The right granted to an inventor by the federal government that permits the inventor to exclude other
from making selling or using the invention for a period of time.
1. Why should you favor and support the structures of the market?
A. Copyright B. Demand C. Supply D. Patent

4. The intellectual property rights that protects the creator or owner of original expression work
A. Patent B. Competition C. MonopolisticD. Copyright

5. The rivalry among various sellers in the market

A. Monopoly B. Oligopoly C.Competition D. Market

6. An ideal situation for the buyers and sellers

A. Oligopoly B. Monopoly C. Perfect Competition D.Imperfect Competition

7. When buyers and sellers have relevant information about the market, including the price and quality
of the product.
A. Perfect Consultation C. Perfect Competition
B. Perfect Monopoly D. Perfect Information

8. A situation of diffused impersonal competition among sellers who compete to sell their goods
A. Market B. Supply C. Demand D. Competition

9. When firms can enter and exit to incur any special expense
A. Transaction Cost B. Free entry and Exit C. Monopolistic D. Perfect

10. When all firms sell an identical product

A. Monopoly B. Competition C. Homogeneous GoodsD. Ideal

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 ENRICHMENT ACTIVITY 2

1. Why are homogenous products being sold in the absolute competition?

2. How does people benefit from promotional gimmick from the companies?
3. Why are the products of the market still favored in absolute competition even if announcement is not
used often?

ENRICHMENT ACTIVITY 3

Directions: After knowing the structures of the market, put a check the line that
shows your thoughts on it.
10 9
 Types of I really like it Close to me I don’t like it Will return to
market
Absolute
Competition
Monopoly
Oligopoly
Monopolistic
Competition

Answer the ff:

1. What type of market do you like and why?
2. Do you dislike a certain type of market? If yes, why?
3. Which type of market is close to you and you’d like to do over and over again?

To prove the lessons you learned on discussing the markets with

absolute competition and apply it to everyday life, pick a task. The
tasks will be graded with the following criteria.

 Dialogue
 Face expression
 Materials
 Message
Task 1
Criteria Excellent GreatTask
(3) 2 Satisfactory Task 3
Need more
Make an advertisement(4)
that Create a stage play that shows (2) Write an essay
workabout the
shows he product of different how does the consumers observations and happenings in
structures of the market
Pronunciation communicate during absolute the structures of the market
and loudness competition and monopoly
of the
dialogue

Body
movements
and face
expression
Used a
variety of
materials

Clarity of 11
12
message
 ANWER KEYS

Activity Number 4 Activity Number 3

1. ? 1. ?
2. ? 2. ?
3. ? 3. ?
4. ? 4. ?
5. ? 5. ?
6. ? 6. ?
7. ? 7. ?
8. ? 8. ?
9. ? 9. ?
10. ? 10. ?
Activity Number 2 Activity Number 1

1. ? 1. ?
2. ? 2. ?
3. ? 3. ?
4. ? 4. ?
5. ? 5. ?
6. ? 6. ?
7. ? 7. ?
8. ? 8. ?
9. ? 9. ?
10. ? 10. ?

What Have You Learned? What Do You Already Know?

1. A 1. A
2. C 2. D
3. D 3. D
4. D 4. B
5. C 5. B
6. C 6. ?
7. D 7. ?
8. A 8. ?
9. B 9. ?
10. C 10. ?

REFERENCES

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 Books

1. Rosemary P. Dinio,PhD, Applied Economics Manila, Philippines: Rex book Store, 2017, page/s #33-37
2. George A. Villasis, Applied Economics Manila, Philippines: Rex book Store, 2017,
page/s #33-37

The characteristics and features of the market structure and differentiate these various market structures in
terms of number of sellers, types of products, entry/exit to market and pricing power. The market as a place of
impersonal competition among sellers who compete to sell their goods. There is what we call the perfect
imperfect competition and monopolistic competition. So this module will surely enlighten us on how the different
factors in the market can raise these different competitions in the market.

Market Structures

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DEPARTMENT OF EDUCATION
Region 3
Division of Cabanatuan City
Curriculum Implementation Division (CID)
Learning Resource Management and Development System (LRMDS)
This self-learning module (SLM) is developed by the SDO Cabanatuan City CID-LRMDS Team under Project EL AR: Enhanced
Learning thru Adequate Resources. Cover and page elements illustrations by Carl Jan B. Briones. Project EL AR logo by Gemmarie G.
Rivas