VARIOUS FORMS OF

MARKETS & THEIR

FEATURES
The British School
Form 11
Economics
Vibha Gupta

MARKET STRUCTURE

Market structure describes how a market is

organized in terms of how much
competition there is usually on supply side.

MARKET STRUCTURE
To assess the amount of competition in the
market we look at the following features.
The amount of control a firm or group of
firms has over market supply or output.
The amount of influence a firm or group of
firms have over market price
The freedom new suppliers have to enter
the market.
Barriers to entry that restrict new
competition.

TYPES OF COMPETITION

1.
2.

On the basis of features discussed before

Market structure can be divided into two
types.
Perfect competition
Imperfect competition

MARKET STRUCTURE-PERFECT
COMPETITION
Perfect competition is a market structure
with the highest level of competition. There
are no barriers or restrictions on the entry
into or exit from the market.
Features1. There are many buyers and sellers.
2. There is a low degree of market
concentration which in other words means
each firm has a tiny share.
3. There is free entry and exit from the market.
4. The product is homogeneous or identical.
5. The buyers and sellers are perfectly
informed.

MARKET STRUCTURE-IMPERFECT
COMPETITION

Imperfect competition is a market structure

with the lower level of competition.
Depending on the level of competition
imperfect competition can be further
divided into following categories.

Monopolistic competition
Oligopolistic competition
Monopoly.

IMPERFECT COMPETITIONOLIGOPOLY

An oligopoly is a market structure with a

small no of firms dominating the supply of a
particular good or service.
For ExampleThe oil extraction and petroleum industry.
Commercial banking
Features1-Small no of firms.
2-Price leadership and vigorous non price
competition.

OLIGOPOLY-IMPERFECT
COMPETITION

In an oligopoly to influence the market

price firms adopt following pricing
strategies.
1. Formal price collusion-Cartel
2. Informal Price collusion-Tacit
1-Cartel- It is a formal agreement between
firms to regulate market supply and price.
For example-OPEC
2-Tacit It is an informal competition where
firms keep a watch over market prices.

MONOPOLY: DEFINITIONS
Traditional Definition

Market with a
SINGLE supplier

Modern Definition

A firm which has 25%

or more of the total
market share

OCCURRENCE OF A MONOPOLY

May exist from the start

Mergers and takeovers may result in a
monopoly

MONOPOLY : FEATURES

HOW MONOPOLIES CAN

?
RESTRICT
COMPETITION
Existence

of barriers to entry and exit

Artificial barriers
Natural barriers

ARTIFICIAL BARRIERS TO
ENTRY

NATURAL BARRIERS TO ENTRY

MONOPOLY BEHAVIOR

Wage Rate

D
P
P1
D

Q1

Quantity

DISADVANTAGES OF MONOPOLY

1.
2.
3.
4.
5.

Less consumer choice

Higher prices
Lower product quality
X inefficiency
The need for regulation

ADVANTAGES OF MONOPOLY
1- Many Monopoly firms due to their size
and their ability to earn high profits are
able to spend a large amount of money on
product improvements and more efficient
production processes.
2- Customer at times benefit from the
efficient production process as it means less
cost for the company and it may pass off the
benefit to the customers.

THANK YOU!