Applied Economics

Lesson 3
What is Market Structure?
- Refers to the competitive environment in which
buyers and sellers operate.

Competition
- Is rivalry among various sellers in the market.
• Perfect Competition
• Monopolistic Competition
• Oligopoly
• Monopoly
• It is a market structure where there are
large numbers of sellers and buyers.
• Homogeneous product .
• The price of the product is determined by
the industry .
• One price prevails in the market and all
the firms sell the product at the prevailing
price .
Example:

Agricultural Products
• Large number of buyers and sellers
• Homogeneous product
• No barriers to entry
• Perfect knowledge of economic agents
of market conditions such as present
and future prices, costs, and economic
opportunities
• It is a mid-way between perfect
competition and monopoly .
• Products are differentiated
• There is free entry and exit in the market that
enables the existence of many sellers
• Offers similar products but not identical and
satisfy the same basic need.
Example:

Milk Tea Products

• Large number of firms

• Product differentiation

• Freedom of entry and exit

• Non price competition

• Price policy
• It is a market structure in which there are few
sellers of a product selling identical or
differentiated products.
Example:

Network Providers
• Relatively small number of sellers
• Interdependence of the firms
• Difficulty in entry and exit
• It is a market structure in which there
is only a single seller of the product .
• One firm has full control over the supply of
the product .
Example:
• Sole supplier of the product
• Large number of buyers
• No close substitutes
• One firm industry
• Absence of entry
• Monopolist is price maker
Determine what type of market structures
are the given businesses.