forms of market

CLASS 11
MICRO ECONOMICS
 NOTES
FORMS OF MARKET
In economics market refers to the whole region where buyers and
sellers are in contact with each other to effect purchase and sale of
a commodity.

Forms of market
1.Perfect competition
It refers to a market situation where there are large numbers of
buyers and sellers dealing in a homogeneous product at a price
fixed by the market. That is, the products which are offered in the
market are identical in each aspect.

Features
Homogeneous product
This is one of the basic feature of perfect competition, the product
that is offered for sale in this market is homogeneous in nature
(identical in every aspect).

Free entry and exit

There is free entry and exit for the firm under perfect competition.
So, the firms in the perfect competition could make normal profit
only. As whenever the existing firms start making abnormal profit
then new firms will come forward to minimize the excess profit and
vice versa.

Identical price
Due to homogeneous nature of the product, the price of product is
also same in perfect competition
JOIN OUR TELEGRAM
JOIN OURCHANNEL
YOUTUBE( GAURAV JAIN OFFICIAL )
COMMUNITY

FREE NOTES/PDF PRACTICE PAPER DAILY UPDATE

ECONOMICS ON YOUR TIPS COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
Perfect Knowledge
Due to single product, The buyers and sellers were completely aware
about the price, quality and quantity of product.

No advertisement cost
Due to similar product, the producer does not use any
advertisement to popularize their products.

Firm is price taker

Under perfect competition, the firm is only a small unit of the whole
market. Hence it plays no role in determination of price. And hence,
the firm is only price- taker(takes the price decided by the industry)
whereas the industry is a price-maker.

Demand curve
Under perfect market, the price of the commodity remains
unchanged. So the demand curve slopes horizontal straight line.
It means that a small change in price leads to a greater change in its
quantity demanded.
(e = ∞)

JOIN OUR YOUTUBE COMMUNITY

CONNECT TO GAURAV SIR DIRECTLY ON WHATSAPP

ECONOMICS ON YOUR TIPS

7690041256
COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
2.Monopoly Competition
It is derived from 2 Greek words, ‘Monos’ which means single and
‘polos’ means a seller.
It is a type of market in which there is only one seller selling his
product with no close substitute and strong barriers to entry.

Example Railways in India.

Features
One seller and large number of buyer
The main root of monopoly is that, under Monopoly Competition
there is only one seller and large number of buyers in the market.

No close substitute of the product

As there exist only one seller for the product. So, it is very difficult
to get an alternative product under monopoly.

Restriction in entry
There exist strong barriers for entry of new firms and exit of existing
firms. So, monopoly firms can earn abnormal profit in long run.
These barriers could be due to legal restrictions like licensing,
patent rights etc.

Price discrimination
A monopolist firm can charge different prices for his product from
different sets of consumer at the same time (just because of sole
seller in the market)

JOIN OUR YOUTUBE

FOLLOW COMMUNITY
US ON INSTAGRAM
@gaurav_jainofficial
ECONOMICS ON YOUR TIPS COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
Demand curve
In Monopoly Competition there is a single seller who fixes its own
price output policy (monopolist). If the monopolist tries to increase
its quantity of selling then it can reduce its price.

3.Monopolistic competition
This is the type of market in which there are large number of buyers
and selling producing similar but differentiated product which are
close substitute of each other.

Features
Large number of buyers and sellers
Under monopolistic competition, there exist large number of buyer
and seller dealing in differentiated products.

Price differentiation
In this competition the products which are produced by the seller
are differentiated in nature.

JOIN OUR YOUTUBE COMMUNITY

ECONOMICS ON YOUR TIPS COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
i.Real product differentiation On the basis of quality, quantity,
technology etc..
ii.Fancy price differentiation On the basis of packing, binding, free
gift etc..

Selling Cost
It is an important feature of monopolistic competition. The
producer has to spend a lot of money on advertisement just to
popularize their quality, quantity and technology of the product.

Selling cost refers to all the expenses incurred on marketing, sales

promotion and advertising of the product.

Free entry and exist

In monopolistic competition, firms are free to entry and exit at any
time they wish. It means there is neither abnormal profit nor loss to
a firm in long run But, the entry is not as easy as perfect
competition.

Lack of Knowledge
Due to large number of similar but differentiated products it
becomes difficult for a consumer to evaluate all the products
available in the market.

Price controlling
In this market, the products are heterogeneous (different) in
nature. Hence, the price output policy is made by the producer
itself.
They have the partial right for controlling the price of the product.

JOIN OUR TELEGRAM

JOIN OURCHANNEL
YOUTUBE( GAURAV JAIN OFFICIAL )
COMMUNITY

FREE NOTES/PDF PRACTICE PAPER DAILY UPDATE

ECONOMICS ON YOUR TIPS COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
Non-price competition
The firm under this competition can compete with each other
without changing their price.
It refers to competing with other firms by offering free gifts, making
favourable credit terms, etc. but without changing their price.

Demand curve
In this competition the demand curve is highly elastic just because of
the close substitute of the product and price controlling power of
the seller.

Demand Curve=Average Revenue (AR) Curve

JOIN OUR YOUTUBE COMMUNITY

CONNECT TO GAURAV SIR DIRECTLY ON WHATSAPP

ECONOMICS ON YOUR TIPS

7690041256
COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
4.Oligopoly market
The word oligopoly has derived from 2 Greek words ‘oligi’ means few
and ‘polien’ means to sell.
Thus it is the market structure in which only few sellers are selling
homogeneous or differentiated products.

Features
Few firms
Interdependence
In oligopoly market there are few sellers of the product. The price
output policy of one seller will affects the policy of other.
If one seller reduces its price then other also has to act in the similar
way to compete in the market. Hence, the sellers are interdependent
on each other for changing price, quantity and quality of the
products
.
Selling cost
It is an important feature of oligopoly. Since the sellers change their
quantity, quality and price of the product just to popularize their
product.

Barriers of entry
Patent, requirement of large capital, control over crucial factor etc
are some of the barriers. The firms who cross these barriers can
enjoy abnormal profit in long run.

Formation of Cartels
(Cartel:-Some firms retain their individual identity but co-ordinate
their price and output policies in order to act as monopoly known as
cartel)

JOIN OUR YOUTUBE

FOLLOW COMMUNITY
US ON INSTAGRAM
@gaurav_jainofficial
ECONOMICS ON YOUR TIPS COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NOTES
FORMS OF MARKET
Nature of product
i. Homogeneous product (Perfect oligopoly)
ii. Differentiated product (Imperfect oligopoly)

Non-price competition(Same as of monopolistic competition)

Indeterminate demand curve

Under oligopoly market the firms continuously compete with each
other. Hence, it is very difficult to get combination between price
and quantity of selling of the product.

Types of oligopoly
I. Collusive oligopoly
Under this the firm’s Collectively decides the output quota and
price of the product. They avoid competition through a formal
agreement.

II. Non - Collusive oligopoly

Each firm decides its price output policy independently and every
firm tries to increase their sales through competition.

Principal basis of market classification

No of buyers and sellers.
Nature of commodity.
Degree of price control.
Knowledge of the market.
Mobility of factors.

JOIN OUR YOUTUBE COMMUNITY

ECONOMICS ON YOUR TIPS COMMERCE CHAMPIONS ACCOUNTS ADDA

CLASS1111ECONOMICS
CLASS ACCOUNTS
 NE SHOT
THE GAURAV JAIN

BEGINNER ADVANCED
FORMS OF MARKET CLASS 11
WHATSAPP CHANNEL FOR NOTES AND IMPORTANT QUESTIONS

7690041256
YE LE BAALAK ... MAUJ KAR

THE GAURAV JAIN 7690041256