FORMS OF MARKET 7O DO concept of Market «Forms of Market ( Perfect Competition (@ Monopoly {i Monopolistic Competition (w) Oligopoly Basis of Market Classification 1, Cgncept of Market ‘Ordinarily, for an individual it would mean a shopping complex. But, for a student of economics, this is not correct. In economics, the concept of market has a special meaning. It does not refer to any geographical area where goods are sold and purchased. Instead, it refers to all such systems (or arrangements) that bring the buyers and sellers'Im contact with each other to settle the sale and purchase of goods. The system could simply be an electronic mail or a telephonic communication that brings the buyers and sellers in contact with each other and settles the sale and purchase of goods. Online marketing does not involve any shopping complex. The concept of market refers to all such systems or arrangements that bring the buyers and FOC US sellers in contact with each other to settle the sale and purchase of goods. It does not refer to any ime a shopping complex. _~ ee Following are some important forms of market Perfect Competition Perfect competition is said to exist when there is a large number of sellers and buyers of a commodity, and no individual buyer or seller has any control red its price. Product is homogeneous and its price is determinea oy the ‘Orces of market supply and market demand 295z= Perfect competition isa form of the market where there is large number of buyers and sellers of Homogeneous producti sold and its price is determined by the forces of supply and demand. An individ or aseller has no control over price Features of Perfect Competition and their Implications A perfectly competitive market has the following features. Each feature explained with its implications (1) Large Number of Small Buyers and Sellers of a Commodity: The num, of buyers is so large that the demand of an individual buyer is only small fraction of the market demand for a commodity. Likewise, number of sellers is so large that the supply of an individual seller (firm is only a small fraction of the market supply. It implies that No matter demand of an individual buyer increases or decreases, mari demand remains unaffected. Likewise, no matter supply of an individual firm increases or decreases, market supply remains unaffected. When (due to increase or decrease in individual demand or individual suppiy), market demand and market supply are not affected, market price is also not affected. It remains constant for an individual firm or an individual buyer in the market. Significantly, a firm's demand curve (also called price line) becomes a horizontal straight line. At the given price, it can’ sell any amount of the commodity. Fig. 1 illustrates this situation Firm's Demand Curve/Price Line Y Perfect Competition pj} Ar [Pnce Line) Tf can sell any amount lhe commode te aS pce cannot uence the market pce ACEP = ‘Under perfec competion arc takes not prot make Implications/Significance ‘These observations highlight the implications/significance of large number of buyers and sellers (@ Market price is given toa firm. Afirm can sell any amount of the commodity at the given pre It 5 eue «cannot influence market price (i) Firm's demand curve (also called firm's price line) is a horizontal straight lie, or perfectly last (iii) Elasticity of demand for the firm's demand = (iv) Firm isa price taker, nota price maker. (2) Homogeneous Product: Under perfect competition, each firm (in the industry) sells a homogeneous product. A product is said to 6€ homogeneous when each unit of it (sold in the market) is identical it 296 Introductory Microeconomicssize, shape, colour, weight (oF in any other respect). So that, the buyers Go not find any difference in the product as sold by different firms in the arket. It is a situation of zero degree of product differentiation. It may jako be called a situation of the market where buyers find products of gitferent firms (in the industry) as perfect substitutes of each other when the product is homogeneous (and there is a zero degree of product differentiation), a firm has no control over price. Even a slightest increase in the price by one firm will shift its buyers to other firms producing the same commodity. Also, there is no need for advertisement to promote sales of a firm. So that there are no advertisement costs or selling costs Implications/Significance ‘ese observations highlight the implications/significance of ‘homogeneous product {,) Homogeneous product leads to uniform price in the market. in) Because of zero degree of product differentiation, products of different firms (in the industry) are perfect substitutes of each other. (ini) Zero degree of product differentiation leads to zero degree of market control. Accordingly, a firm cannot influence price of the product. (iv) Because of zero degree of market control, the product price remains to bdminimum (as determined by the market forces of supply and demand). 3) Perfect Knowledge: Buyers and sellers are fully aware of the prevailing price in the market. They are also aware of the fact that homogeneous product is being sold in the market. Accordingly, producers cannot charge different prices from different buyers. Higher profit through ‘price discrimination’ is ruled out (4) Freedom of Entry and Exit: A new firm is free to enter the industry and an existing firm is free to leave it. Here, we need to understand the concepts of short period and long period. Short period, by definition, is too short for an existing firm to leave the industry, as well as too short for a new firm to join the industry. Long period is long enough for the existing firm to leave the industry, as well as long enough for the new firm to enter the industry. Thus, entry and exit of the firms is possible only in the long period, not in the short period Implications/Significance ‘These observations highlight the implications/significance of ‘freedom of entry and exit’ () Because of free entry and exit, firms in the long run earn only normal profits (TR = TC or AR =AC). This is how it happens: In case extra-normal profits are earned, new firms will join the Industry. Market supply will increase. Market price wll fal. Extra-normal profits will be wiped | _— ‘ut. In case of extra-normal losses, some of the existing firms will leave the industry Market supply will decrease. Market price will increase. Extra-normal losses will be wiped out EO. CUS | i Because, during the short period, exit/entry is ruled out, a firm may operate under any of the | fallowing situations: (@) normal profits (TR = TC or AR = AC), (b) extra normal profits (TR > TC or AR » AC), and 0 extra-normal losses (TR < TC or AR < AC). Forms of Market 297 Ax(5) Independent Decision-making: There is no agreement between two firms (in the industry) regarding quantity to be produced g.\ Y to be charged. In other words, firms do not form ‘trusts’ gy si" Accordingly, under perfect competition there is: (i) maximum gut and (ii) minimum price bu, (6) Perfect Mobility: Factors of production are perfectly mobile. They move to that industry where they get higher price. Accordingly. y-/"" '. Uniform, factor price prevails in the market BB erst mobic leads to uniform price ofthe factor, no matter who hires it (7) No Extra Transport Cost: Buying a commodity from one seller, a, than the other, does not involve any extra transport cost. This fut ensures that any producer is not able to charge higher price foy 4, product. Only one price prevails in the market. Three Vital Conclusions Study of the features of perfect competition offers three vita concluson, as under (1) A Firm Under Perfect Competition is a Price Taker, not a Price Maker Price is determined by the forces of market demand and market sup A firm sells its output at the given price. Therefore, a firm under pert competition is a price taker, not a price maker. This is explained with reference to three basic characteristics of perfect competition (i) Large Number of Firms: The number of firms selling a product ss ae that no individual firm (by increasing or decreasing its output) can mate any meaningful difference in the total market supply. Accordingly, an individual firm cannot influence the market price. A firm is to take the market price as given (or as constant), (ii) Homogeneous Product: All firms in the industry produce homogeneous: product. Or, products of all firms in the industry are perfect substitutes of each other. So that, if any firm fixes its price higher (than the exiting market price), buyers would shift to other firms. The firm will simply te driven out of the market. However, here comes an obvious question Why cannot a firm exercise price control by lowering its price? Ansie! is simple: Ifa firm can sell any quantity zt the existing price, it makesro sense to lower the price (iii) Perfect Knowledge: Buyers are assumed to have perfect knowledee regarding product availability and product price. Thus, a produ! cannot charge higher product price assuming that the buyers 2 ignorant about it. Hence, it is concluded that under perfect competition, it is not possb for a firm to control price of the product. The firm is simply a price takes a price maker. 47 _ 298 invoductory Misceconomesand Curve of the Firm Under Perfect Competition is Perfectly Elastic a Jy elastic demand curve implies that the elasticity of demand for (is Product is equal to infinity (E, = 2) is indicated by a horizontal the ht line, as in Fig. 2. It shows that the firm can sell any amount of the sri rity at the prevailing price. But, even a small increase in price would om ‘eed to zero demand. Firm’s Demand Curve Under Perfect Competition (Ey =] P P. (Horizontal straight line demand curve implies that Eg =] Price Quantity “he frm can el any output atthe gven pice (OP Bt even a nightest increase pice would lead to zee sales. Impying tate,== Fig. 2 shows that at the given price OP, the firm can sell any quantity: Aor OB, and even more than that. But, a slightest increase in price would mean that the demand is zero. A perfectly elastic demand curve simply indicates that the firm has no __ control over price (3) A Firm Under Perfect Competition earns only Normal Profits in the Longin This is owis is and exit under perfect competition. In situations of extra-normal profits, new firms will join the industry. Consequently, market supply will increase. Market price will fall. Extra-normal profits will be wiped out. In situations of extra-normal losses, some firms will leave the industry. Consequently, market supply will fall. Market price will rise. Extra-normal losses will disappear. Q. 1. What preydnis a perfectly competitive firm to Fe The product price and capture the entire market? Ans. Two poirits need to be noted in answer to this Question: (i) Why should a firm lower the price when at the existing market price, it can sell any amount it wishes to sell? It makes absolutely no sense. (i) Under perfect competition, there is a large number of buyers and sellers of a product. Each firm produces | only a smal fraction of the total market supply. It has a limited production capacity. Now, if an individual | firm lowers the price, all buyers in the market will rush to this firm for supplies of the product. But, by definition, the firm is sdinah a it cannot produce enough forall the buyers in the market. Hence, the possibility of capturing the entire market by lowering the price f ruled out. | Forms of Market 299 X\oQ 2 Differentiate between consumer's demand curve and firm's demand curve Ans. Demand curve shows the relationship between price and quantity demanded. In case of consumer's demang itis the relationship between price and quantity demanded by an individual buyer. On the other hand, incase of firm's demand, itis the relationship between price and quantity demanded of firm's output by the various | buyers in the market. Quantity demanded of a firm's product, obviously, is equal to sales/output of that firm. Therefore, frm, demand curve also shows the relationship between price of the commodity and firm's sales/output | Important Obsarvaton”; ~~ Monopoly~ Noro nes ease hs belay earcgte est It isa form of the market in which there is a single seller of a product wi ths profuct ang fing heh NO Close substitutes. Example: Railways in India are a monopoly industry sooroney eu | the Government of India. Since there is only one producer ofa product int ‘esersteevotandngie | market, the distinction between ‘firm’ and industry disappears, “ecomaunenerten | (Note: An industry isa group of firms producing a particular product] unde merc 1 Satencteceage! | Features of Monopoly | ontieobertand wept | | manna pst a at The main features of monopoly are as follows: (1) One Seller and Large Number of Buyers: Under monopoly, there is Single producer of a commodity. He may be alone, or there may be a group of partners or a joint stock company or a state. However, there a large number of buyers of the product. : Implication/Significance Because, he is a single seller, the monopolist enjoys full market control. He can fix the price of hi product as he desires. Te monopolist, thus, isa price maker. (2) Restrictions on the Entry of New Firms: Under monopoly, there are some restrictions on the entry of new firms into the monopoly industry. Generally, there are patent rights granted to the monopoly firm. Or, a monopoly firm has exclusive control over a technique (of production) or over the raw material needed for production. Implication/Significance Because of the restriction for the new firms to enter the industry, monopolist earns extra-normal profit bath in the short period as well as long perio. (3) No Close Substitutes: A monopoly firm produces a commodity that has No close substitutes. Example: There is no close substitute of rallays 35 a ’bulk carrier. (4) Full Control Over Price: Being a single seller of the product, a monopolst has full control over its price. A monopolist, thus, is a price maker. He ccan fix whatever price he wishes to fix for his product. (6) Pee Disciination A monopolist may charge different price trom ifferent buyers. It is called price discrimination. Price discriminstio” refers to the practice of charging different prices from different byes for the same good ‘Monopoly isa form ofthe market in which there isa single seller or producer ofa commodity There are no cst substitutes ofthe monopoly product and there are legal, technical or natural barrier to the entry of new fim it the monopoly market. A monopolist has complete control over price and can also practise price discrimination SoS 300 Introductory Microeconomicsy curve of Monopoly Firm ryllcontrol VET Brice under monopoly d loes not mean that the monopolist gary amount of the commo, ° 7 od ity at any price Once the monopolist fixes of the commodity, quantity demanded will depend upon the buyers resi demand more if price is lowered, and demand less if pice is raised go that there 15 an inverse relationship between price and quantity sold by tne monopoly firm. Accordingly, demand curve for a monopoly firm slopes pnd, as 16 3 Y Dy: Demand Curve for a Monopoly Firm LA th Price ° ca x Quantity Fer demand crv (Dy) unde monopoly slope Cowra showing aimee retionship between pce and qty Moe soldat ole pice aes 0a ger pce Dy is the demand curve for the monopoly firm. It shows inverse relationship between price and quantity: OQ quantity is sold when price is OP. When the price is reduced from OP to OP,, quantity sold increases from 00 to 00, HOTS 2 Amonopolistis a price maker. How? 495. A monopolist is a price maker. It means that he can fix whatever price he wishes to fx for his product. It is because ofthe following reasons {i) Amonopolist isa single seller of the product in the market. There is no competition (i) There are no close substitutes of the monopoly product. So that, there is no fear that the buyers would shift from one product to the other to any significant extent. (itl) There are legal, technical or natural barriers to the entry of new firms. So that, there is no challenge to the price fixed by the monopolist. How does a Monopoly Market Structure arise? «__—— ‘Monopoly market structure may arise in any of the following ways (1) Government Licensing/Government Control: The government may Brant Ticense for the production of a particular commodity only to one producer, Accordingly, monopoly comes into existence. Also, the government may decide to control the production of certain goods (or Services) exclusively through its departmental undertakings, like Railways 'n India Forms of Market 301ee 302 introductory Miroeconomics Pan i and (2) Patent Rights: New products may see ae oe amounts rent bse monopoly rights regarding the shape, desigr er characteristic, ‘coptin rena | the product. Patent rights may be ue Hes ae Wohi iowa a np fnnology by others. Accordingly, monopoly man, connemes the use of patented technology by Yy matt ‘he oot or ached structure emerges. hs pane meen | (3) Cartels: It refers to formation of a rou by the comodting fits int 2 mt fe wha market Of course, tisis possible when the number of firms is smal, ry oe ees group as a whole secures monopoly control of the market (4) Gift of Nature: Monopoly may emerge as a gift of nature. The oq spring of water in an island, for example, may be under the contol one person, HOTS Q.Whyare patent rights granted? ‘Ans. Patent rights are granted with a view to: (encouraging research and development, and (i) encouraging new discoveries and innovations. Monopolistic Comp 0 It is a form of the market in Which there are many buyers and sellers of the product, but the product of each seller is different from that of the other. Thus, there are many sellers, selling a differentiated product. Product differentiation is generally promoted through trademark or brand name Example: Firms producing different brands of toothpastes, viz., Colgate, Close-up, Pepsodent, etc Monopolistic competition includes the features of monopoly and perfect competition. Trademark or brand name gives some monopoly power to the firms. Different firms often charge different price for their product. In other words, each firm tends to exercise some control over price. On the other hand, since many firms are producing a commodity (like toothpaste) theres competition in the market. No firm is able to exercise full control over prt of the product. Thus, we can say that a firm under monopolistic competition exercises only a partial control over price. Features of Monopolistic Competition The main features of monopolistic competition are as under (1) Large Number of Buyers and Sellers: As under perfect competito™ there is a large nuraber of buyers and sellers. Also, the size of each firm is small. Each firm has a limited share of the market. (2) Product Differentiation: Product differentiation (brielly led ‘differentiation’) is a distinct feature of monopolistic competito” Differentiation implies that rival firms are selling products which are perfect substitutes but close substitutes of each other. Example: Coe toothpaste and Binaca toothpaste are close substitutes of each other. when they may not be perfect substitutes for most buyers in the marétImplications/Significance poving observations highlight the implications/significance of ‘product differentiation’ 0 nate nee partial control over price of ts product. Partial control over price leads to partial anopo) POWET D> differentiation, there isa large of bert ity accord enon ok ee FOCUS vs demand curve shows high elasticity of demand. > olay of ose substitutes increases consumes choice, It increases consumers selfare ruc ferentiation may Be real rk, n case its fake tad to explain of the umes through fake publicity of he product ais HOTS = hat makes it possible to exercise partal control over price? Why full control over price isnot possible under | monopolistic competition? sex tis through product ferentiation that frm under monopolistic competion exrss partial conto over price. ference in design, colour or even packaging of the product attracts buyers to buy apartcular product ten ata relatively higher price. Fall control over price i ruled out under monopolistic competion, because: {i there are many competitors in the market, and {i) there isa large numberof close substitutes. 8) Seling Costs: Product differentiation is often supported with heawy advertisement/publicity. It leads to selling costs. These costs are incurred by a firm to increase its market share. Because of advertisement, buyers develop a brand loyalty. Once a ‘brand loyalty’ is established, the firm enjoys higher and higher control over price (6) Downward Sloping Demand Curve: Partial control over price leads to downward sloping demand curve (Fig. 4 ofthe firm: quantity sold increases when price is reduced. If price is raised, quantity sold tends to reduce y Dyc?Firm's Demand Curve Under ‘Monopolistic Competition wy | ‘| | Puc Sey o Quantity So Important Both under monopoly and monopolistic competition, firm's demand curve tends to slope downward | From left to right. But, under monopolistic competition, the demand curve is much flatter than under monopoly. We know, flatter the curve, more elastic itis. So that, demand curve under menopoistc cometon shows a higher degre of elasticity of demand than under monopoly. This is because | large number of close substitutes (of the product) are available in a monopolistic competitive art whereas in monopoly market there are no close substitute at all. Forms of Market 303 ‘ Soe(5) Non-price Competition: Nonprice competition is another im, feature of monopolistic competition. The firms often avoid gets price-war. Instead they focus on non-price competition Dotan ine ns, BM Non-price competition is a market strategy adopted by a firm to increase its market shay, promoting its product through advertisement or publicity. > Focus " — A firm's product is launched and promoted by the celebrities. — A firm offers better after-sale service’ of the durable goods like AC and TV, even when, the pre oe = Implications/Significance These observations highlight the iplications/significance of ‘non-price competition (i) Non price competition leads to high advertisement costs. Accordingly, product price tends to remain high (i) Also, the product price tends o remain sticky. Because the firm now focuses on higher revenue through bang loyalty, rather than lower price (6) Freedom of Entry and Exit: Firms are free to enter the industry or lne it. However, new firms have no absolute freedom of entry int indy Products of some firms may be legally patented. New firms came produce identical products. Example: No rival firm can produce/sa patented item like Woodland brand of shoes. a Implication/Significance Freedom of entry and exit leads to normal profits in the long ran Lack of absolute freedom enables the exis firms to earn monepoly profits (xtra-normal profits). 4a (7) Lack of Perfect Mobility: Factors of production lack perfect moby Accordingly, different prices prevail for the same factor in the market, (8) Lack of Perfect Knowledge: Sellers and buyers of the products (as wel 5 owners of factors of production) lack perfect knowledge about the market. Because of product differentiation, itis not even possible to hive perfect knowledge about a variety of brands in the market. This lds to consumer's exploitation by way of higher price for the low quaity product HOTS Q._ Differentiate between price discrimination and product diferentiation ag Price Discrimination | {i Price discrimination occurs when a producer {i Product | charges different price from diferent buyers of the producers diferente their product in terms cf | ‘same product. Example: The only surgeon in your shape, size, packaging, trademark or brand name || ea may charge low fe from the poor patients and | This is done by a firm to increase ts market shave | high fee from the rich patents through brand loyal. | | {i Price eiscriminaton i atypical characteristic of | i) Product differentiation is atypical characters ot | ronopoly where the producer has ull control over | monopolistic competition where the produce | — only partial contol over price —_priee, _ . RA. 3.04 introductory Microeconomics eea oly ~~ lig? form of the market in which there are a few big firms and a large is | 8" puyers of a commodity. Each firm has a significant share of the prbet price and output decision of one firm significantly impacts the price decisions of the rival firms in the market. Accordingly, there is Fi of interdependence among the competing firms: price and aM policy of one firm depends on the price and output Policy of other(s). fo Pot competition (involving high degree of interdependence) is ‘qutthroat competition’. Example: There are only a few car-producers Sipe indian Auto market. Toyota, Ford, GM, Audi, BMW and Volkswagen eerome well known brands. Each one is capturin : a significant share of 2 auto market. Price and output decisions of each Producer (like Toyota) cenfcantly impacts the price and output decisions of the other produce, vie Ford and GM). ‘his a features of Oligopoly The principal features of oligopoly are as under: (1) Small Number of Big Firms: Oligopoly market is the ‘one in which there is a small number of big firms. A firm enjoys partial control over price through brand loyalty. Brand loyalty is achieved through heavy advertisement. However, full control (over price) is not possible as there ase competitors in the market Implications/Significance ‘When there are afew producers in the market, there isa tendency to form trusts and cartels. This isdone: (i) toavoid price competition, and = 2) to achieve monepoly control of the market. Formation of ‘OPEC (a trust by the oil producing CU 5 ceuries)isan example Ba font: ‘Thus, oligopoly is converted into monopoly. Consequently, there is: (i) low level of output, (high product price, (it) ineficient allocation of resources, and (i) extra-normal profits not only ‘nthe short run but long run as well (2) High Degree of interdependence: Oligopoly market is characterised bya small number of big firms in the industry. The market share of each firm 'Sso significant that its price and output policy leaves a significant impact on the price and output policy of the rival firms. So that, there is 2 very high degree of interdependence among the competing firms with regard ‘0 their price and output policy. Price and output behaviour of one firm often leads to reaction by other firms in the market. Thus, a producer/ firm may not be willing to raise price of the product, fearing that the rival ight not raise it, and the buyers would shift to the rivals. Likewise, firm may not be willing to lower the price of its product, fearing that the ‘Nal firms might lower it more, and the buyers would shift to the rivals. This kind of interdependence makes it very difficult to specify any precise relationship between price and demand. It is precisely because of thissai reason that it has not been possible to develop a (generally acceptaby) theory that explains how an oligopolist achieves an equilibrium ic: Implication/Significance | | a interdependence makes it difficlt to find any precise relationship between pric, FO! US. erg metas ‘Accordingly, itis not possible to draw any specific demand curve | oligopoly frm. @) Difficult to Trace Firm’s Demand Curve: It's not possible to deterring firm's demand curve under oligopoly. This is because of high degree of interdependence among the competing firms. Thus, when a firm lovers its price, demand for its product may not increase, because the rival fing may lower the price more, because of which the buyers shift to the raj firms. implying that there is no specific response of demand to change in price. This makes it impossible to draw any specific demand curve for firm under oligopoly. (4) Formation of Cartels: With a vew to avoiding competition, oligopoly firms often form cartels. A cartel is a formal agreement among the firms to avoid competition. It is sort of collusion of the competing firms, but against competition. Therefore, it is often called collusive oligopoly Under it, output and price are fised by different firms as a group, Sometimes, leading firm in the market is accepted by the cartel as a ‘Price Leader’. All firms in the cartel accept the price as set by the price leader. Collusive oligopoly is like a monopoly form of the market. A cartel takes, full control of the market. It makes monopoly profits. Implications/Significance Formation ofcartls leads to monopoly control ofthe market. The implications are (D Low level of output. (ii) High level of product price. (iti) Inefficient allocation of resources. (iv) Extra-normal profits even over along period of time g (5) Entry Barriers: There are barriers to the entry of new firms. These are created largely through patent rights. Because of these barriers, the existing firms are not much worried about the entry of new firms in the market — Implications/Significance Existing firms continue to exercise monopoly control of the market (through the formation of trusts and cartels) ‘The obvious implications areas stated above (in the previous black) (6) Norprice Competition: Under oligopoly, firms tend to avoid ot competition. Instead, they focus on non-price competition. Example: " India both Coke and Pepsi sell their product at the same price. But." order to increase its share of the market, each firm adopts the Pol NS AZ 306 introductory miroeconoms1 aggresive non price competition, Coke and Pepsi sponsor different ames and sports; they aso offer lucrative schemes (like of maintenance schoo! garden) i thelr product is patronised rs ' Implication/Significance | i «ance competition establishes ‘brand loyalty, Greater the brand loyalty, higher the market contra, or control bl oie Itincreases monopoly power ofthe oligopolist a Collusive and Non-Collusive Oligopoly gers broadly assed asallsiveogpalyand'no-calsv oligopoly cottarive oligopoly (also called Cooperative Oligopoly) is form of the market in which there Me fowfrms i the market and all decide to avold competition through a formal agreement. They wade to form a cartel. Price and output of the member firms is fixed as a collective/cooperative Spesaon Sometimes leading fit in the markets accepted by the cartel a aprice leader Members MR) between pret quay ena | 9. | Selling Costs Notrequired | Very significant Not required Very significant 10.|egree of rice | Nocontl over | Parca contol ove | Full contol ver Partlow contol rice orice price pice 11, |Proftinthe tong |AR=AC | AR= AC AR>AC Ano AC fn = rormal —|=normalprofts |= extrenormal = eaasem profits profits: profits (parca threw andeares) 3, Basis of Market Classification We can now sum up our understanding of different forms of the ma? identifying the following factors as the principal basis of market classfict™” (1) Number of Buyers and Sellers: When there is a large number oD and sellers of homogeneous commodity, it is a situation of ‘competition. ~ | a