Sami Kakar, P.E.

Sami Kakar, P.E.

 BALOCHISTAN UNIVERSITY OF INFORMATION
TECHNOLGY ENGINEERING & MANAGEMENT SCIENCES

ENGINEERING
BY:
ECONOMICS
Sami Kakar, P.E.
LECTURER
DEPARTMENT OF CIVIL ENGINEERING

Sami Kakar, P.E.

MARKET STRUCTURES

Sami Kakar, P.E.

MARKET STRUCTURES
• Market is a point or place where buyers and seller interact
with each other for the purpose of exchanging and trade
of goods and services for their mutual benefits and
satisfaction.
But
• The term market refers not necessarily to a place but
always to a commodity and the buyers and sellers (agents)
who are in direct competition with one another

Sami Kakar, P.E.

MARKET STRUCTURES
• Market structure is the selling environment in which firms
produce and sell their products.

• 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

services market are determined by the nature of
competition prevailing in a particular market
Sami Kakar, P.E.
MARKET STRUCTURES
Major determinants of the market structure
1. The number of firms/sellers operating in the market.
2. The number of buyers in the market
3. The level of product and service differentiation, i.e.
how the company’s offerings differ from the other
company’s offerings.
4. The ease of entry and exit of firms in a particular
market.
5. The economies of scale.
Sami Kakar, P.E.
MARKET STRUCTURES
Major determinants of the market structure

6. The customer turnover, i.e. the number of customers

willing to change their choice with respect to the goods and
services at the time of adverse market conditions.

Sami Kakar, P.E.

MARKET STRUCTURES
Keeping in view the major determinants of market structure, Economists
group industries into four distinct market structures:

Sami Kakar, P.E.

MARKET STRUCTURES

Perfect Monopolistic
Oligopoly Monopoly
competition Competition

Highly Least
Competitive Competitive

No market Complete
power market power

Sami Kakar, P.E.

1. Pure/ Perfect Competition
• Ideal Market structure.
• The number of buyers and sellers is very large.
• Producing a standardized/homogeneous product (that is,
a product identical to that of other producers. There is no
product differentiation.
• No firm can change the price, therefore they are called
PRICE TAKERS. No market power. Prices will be kept
low by competitive pressures

Sami Kakar, P.E.

1. Pure/ Perfect Competition
• Buyers have full knowledge of the products.
• There is freedom of entry into, and exit from, industry.
• Commodities like milk, salt, wheat, cotton and coal are
homogeneous in nature.
• It provides customers with low prices, many choices, and
high levels of competition.

Sami Kakar, P.E.

Sami Kakar, P.E.
2. Monopolistic Competition
• Relatively large number of buyers and sellers
• Producing a similar good that can be seen as unique due to
differentiation (differentiated products e.g. clothing, furniture,
books, restaurants)
• Due to uniqueness of products, a MINI Monopoly is created
so therefore are considered as PRICE MAKERS.
• Firms have relatively less market power.
• There is freedom of entry into, and exit from, industry.
• The restaurant business, Hotels, Shoes Market, Consumer
services, such as hairdressing
Sami Kakar, P.E.
Sami Kakar, P.E.
3. Oligopoly
• OLIG means few. There are a few firms selling homogeneous or
differentiated products.
• Therefore, decision of one firm affects other firms. Firms are inter
dependent. Firms keep eye on the decisions of the other.
• Pure Oligopoly involves homogenous product. E.g. Cement,
Aluminum, steel, copper etc.
• Imperfect/ Differentiated Oligopoly involves heterogeneous
products. Automobile industry, Mobile phones, cigerates, tyres, etc.
• Entry and exit in this industry is relatively difficult.
• Under oligopoly advertising can become a life-and-death matter
Sami Kakar, P.E.
Sami Kakar, P.E.
4. Pure Monopoly

• A market structure in which one firm is the sole seller of a

product or service (for example, a local electric utility).
• One buyer/seller in the market.
• The product has no close substitutes. Unique product.
• These firms are PRICE MAKERS.
• Entry of additional firms is blocked, legally or operationally.
• Firms have complete market power.
• Utilities are effectively licensed to operate a monopoly

Sami Kakar, P.E.

Sami Kakar, P.E.
All the diagrams and figures displayed in this presentation are solely used for educational purposes Sami Kakar, P.E.