Presentation

Course Name: Intermediate Microeconomics I

Topic Name: Revealed Preference & Market

Presented by -

Group Name :The Lighting Bolts

Members: Ritu(21) ,Rakib(35)Maisha(41),Ayshe(73) ),Eshita(99)

Revealed Preference
 What is Revealed Preference?
The bundle (x1, x2) that the
consumer chooses is revealed
preferred to the bundle (y1, y2), a
bundle that he could have chosen.
p1y1+p2y2 <_m
P1x1+p2x2=m
P1x1+p2x2>_ p1y1+p2y2
So, (x1,x2) is directly revealed
prefered to (y1,y2).
Indirect Revealed Preference
Trapping the
indifference curve
The upper shaded area
consists of bundles
preferred to X, and the
lower shaded area consists
of bundles revealed worse
than X. The indifference
curve through X must lie
somewhere in the region
between the two shaded
areas.
Theory of
Market
 The Concept of Market
“Economists understand by the ‘Market’ not any particular market
place in which things are bought and sold but the whole of any region
in which buyers and sellers are in such free interaction with one
another that the prices of the same goods tend to equality, easily and
quickly.”
Characteristics of Market :
• Numerous Sellers and Buyers

• Goods and Services

• Contact

• One price for a product or service at a given time

• Information about the Market Situation

Types of Markets
Markets Based on Location:
1. Local Market: The market where the
products and services are produced and
sold at the same place, is called Local
market.
3. National Market: When
the products and services are
purchased and sold throughout
the country or nation, then the
market is called National
Market. Such type of market is
spread throughout various
states.
2.Regional Market: When the selling of the
products and services is limited to a region
or state, then it is called Regional Market. It
means that the market is limited to particular
state which are spread in various regions of a
state.
4. International Market:
International market is
extended to various country
of the world. The sales and
purchase in this market is
generally referred to as
‘Import-export
Market Based on Quantity:
 Wholesale Market: The sales and purchase of goods and services
take place on large scale, so it is called wholesale market.
Wholesale traders are intermediate between producer and retail
traders.

 Retail Market: The sales and purchase take place at a small

scale, so it is called Retail market. Thus, the retail traders become
an important link and provide the goods and services to the
customers as they buy them from wholesalers.
 Market on the basis of Nature of Transactions:
1. Spot Market: Spot markets refer to those markets where goods are physically transferred
on the spot.
2. Future Market: Future Market is related to those transactions which involve contracts of
the future date.

Market on the basis of Regulation:

 Regulated Market: In this market, transactions are statutorily

regulated so as to put an end to unfair practices. Such markets may be
established for specific products or a group of products.
 Unregulated Market: It is also called as free market as there are no
restrictions on the transactions.
Market on the basis of Time:

1. Very short period market: It refers to that type of market in which the commodities are
perishable (can be used/ consumed once) and supply of commodities cannot be changed at
all as factors like labor, capital and organization are fixed.

2. Short-period Market: Short period is a period which is slightly longer than the very
short period and supply can be increased by increasing employment considering the given
fixed capital equipment.

3. Long-period Market: The supply of commodities may be increased by making changes to

even fixed factors of production and the output adjustments can be made accordingly.

4. Very long-Period or secular period: The time period is very long and the secular change
is recorded over the period in the population, supply of raw material.
 Two major market based on competition:
1. Perfect Competition: Perfectly competitive market is where there are many
firms that sell identical products, with no firm large enough that can influence the
market price.

2. Imperfect Competition
From seller’s perspective: Buyer’s perspective:
 Monopoly  Monopsony
 Oligopoly  Duopsony
 Monopolistic Competition  Oligopsony
Monopoly
 An industry structure where a single firm produces a product for which there is no close substitutes.
 Monopolists are price makers.
 Barriers to entry and exit exist, and, in order to ensure profits, a monopoly will attempt to maintain
them.
 Example: Bangladesh military Academy, Bangladesh Bank, Bangladesh Railway etc.
Oligopoly
 An industry structure in which there are a few firms producing products that range from
slightly differentiated to highly differentiated.
 Each firm is large enough to influence the industry.
 Barriers to entry exist.
 Example: Cement, Medicine, Sugar, Mobile phone, Sim companies etc.
Perfect Competition
 An industry structure in which there are many firms, none large enough to influence
the industry.
 They produce homogeneous products.
 Firms are price takers.
 There are no barriers to entry.
 Example: Rice, Pen etc.
Monopolistic Competition
 A market structure in which there is a large number of firms, each having a small portion of the
market share.
 They produce slightly differentiated products.
 There are close substitutes for the product of any given firm, so competitors have slight control
over price.
 There are relatively insignificant barriers to entry or exit, and success invites new competitors
into the industry.
 Example: Restaurant, Salon, schools etc.
Monopsony
 Market is dominated by only one buyer, the monopsonist.
 Here, a single buyer generally has a controlling advantage that drives its consumption
price levels down.
 Example : NASA.
Duopsony
 Market is dominated by only two large buyers for a specific product or service.
 Combined, these two buyers determine market demand, giving them considerably
influential bargaining power, assuming that they are outnumbered by firms competing
to sell to them.
 Example: Two operating restaurants in a locality that are hiring workers.
Oligopsony
 Market is dominated by a few large buyers.
 The concentration of demand in just a few parties gives each substantial power over
the sellers and can effectively keep prices down.
 Example: The fast-food industry; a small number of large buyers including
McDonald's, Burger King, and Wendy's buys a huge amount of the meat produced by
American ranchers.
Thank You