Mr.

Romeo Mangahas
In Economics, Market is a place where buyers and
sellers are exchange goods and services with
the following condition:
a. Types of goods and services being traded
b. The number and size of the buyers and sellers
in the Market
c. The degree to which information can flow
freely.

2 types of Market Structures

1. Perfect Market
2. Imperfect Market
 PERFECT MARKET
 Is a market situation which contains of a very
large number of buyers and sellers offering a
homogeneous products.

2 Critical Assumptions of Perfect Competition

 behavior of an individual firm.

 Nature of the industry in which it operates

 Characteristics of Perfect Competition

• large number of sellers acting independently.

• With Homogeneous Products
• No artificial restriction placed upon the price or
quantity.
• Easy Entry and Exit
• All buyers have perfect knowledge about the
market conditions
• Firms are price taker.
 IMPERFECT COMPETITION
 It is a market situation wherein the condition
necessary for perfect competition are not
satisfied.
 Under this situation, there are few sellers
which are enough to affect the market price.

Forms of Imperfect Competition

1. Monopoly
 There is only one seller of goods and
services.
 It can influence and has considerable
control over the price.
 Characteristics of Monopoly
• There is only one seller of goods and
services.
• New firms find extremely difficulty in
entering the market.
• There is no available substitute for goods and
services.
• Controls the total supply of raw materials.
• Its operation are under economics of scale
 Classification of Monopoly

1. Natural Monopoly
 It is a market situation where a single firm
can supply the entire market due to the
fundamental cost of industry.
2. Legal Monopoly
 Sometimes called “de jure Monopoly”, which
government grants to a private individual or
firms over the products.
3. Coercive Monopoly
 It is a form of monopoly whose existence as
the sole producer and distributor of goods and
services by means of (Legal and Illegal).
2. Oligopoly
 It is a market situation in which there is a
small number of sellers, each is aware of the
action of others.
Characteristics of an Oligopoly
[

a. There is a small number of firms in the

market selling differentiated or identical
products.

b. Firm has control over price

c. There is an extreme difficulty for new

competitors to enter the market.
 Types of Oligopoly

a. Pure Oligopoly
 It is a type of oligopoly which is common in a market
situation where the products are homogeneous.

b. Differentiated Oligopoly
 That is value characteristics or qualities of goods
vary.

c. Duopoly
 A market situation is seen in the market which both
operates in the same locality although technically,
they are the same.
3. Monopolistic Competition
 A market situation in which there are many seller
producing highly differentiated products.
 Sellers offer products that are closely related but
not perfect products.

Characteristics of Monopolistic Competition

1. Large number of Sellers and Buyers.

2. Limited control of price because of product
differences.
3. Sellers offer differentiated or similar but not
identical products.
4. New firms can enter easily.
5. Competition in the market focuses not only on
price but also on product variation and
promotion.
Monopsony
 Is a market situation where there is only one
buyer of goods and services in the market.
 It gives the firm the ability to control its unit
cost for an input which is similar to the way
the monopoly control its price.

Oligopsony
 A market situation where there is a small
number of buyer.
 Under this situation, firms are buyer and not
sellers.
Seatwork / Assignment
1. Who are the price maker and Price taker?
2. When do we say that there is a special
market structure?
3. What is the importance of Market structure
in relation to prices of goods and services.