Market structures

ECONOMIC ANALYSIS FOR BUSINESS DECISIONS

Introduction Market structures
Monopoly oligopoly
Monopolistic
A firm that dominates a market , by A market dominated by a few large,
What is market structures? This is a market structure with many
gaining over 25% of the market share. interdependent , each of which has
firms producing a slightly similar
However, 40% is often considered to be some control over the market.
Market structure, in economics, refers to how product and where there are few
a market share that leads to market
different industries are classified and differentiated barriers and exit.
dominance. Character:
based on their degree and nature of competition 1. More
for goods and services. It is based on the firms.
characteristics that influence the behavior and 2. Low
outcomes of companies working in a specific barriers.
market. 3. No
Short run: homogeno
Characteristics:
1. Demand is elastic Short run: us product.
1. High barriers 4. Aim to
Types at higher price. to entry. 1. Firms produce at
2. Demand is Pf,Qf to profit maximize
Short/long run 2. Inter profit.
Characteristics: inelastic in lower maximize.
analysis: dependent.
1. One firm price. 2. Supernormal profit
1. Firms profit 3. Each firm
dominate Long run: are made.
maximize where produces
marker. In the long run the Long run:
MC=MR. similar
2. No firms may also 1. Low barriers means new firms are
2. High barriers to product.
competition. collude with each able to enter market.
entry. 3. High other to increase 2. New firms take demand away
3. AR/ price is always barriers. profit. from existing firm.
above AC.

Perfect competition
The market structure where there are many buyers and sellers, where there is freedom of entry to the market, where there
is perfect knowledge and where all firms produce a homogeneous product.
Short run:
1. Initially the market price is P1
Q1.
2. This allows firm to produce at a
point where A R is greater than
AC, leading to abnormal profit .
Character:
1. Many buyers and sellers .
2. No barriers to entry / exit in the long run.
3. Homogenous products produced .
4. Perfect knowledge.
Jagdeesh.s.a
22BBA118