LOGO

CHAPTER # 6
Forms of Business and
Market structure

Prepared by
Kokab Manzoor
Outlines LOGO

What is business
Forms of business
Their advantages and disadvantages
Bank and banking system
Market
Types of competition
Monopoly
Monopolistic competition
Definition of Business LOGO

 The word “Business” includes all legal

human activities concerned with
earning money.

In other words, business is an activity

in which various persons regularly
produce or exchange goods and
services for mutual gain or profit.
Forms of Business LOGO

There are three most common form of

business

1) Sole Proprietorship
2) Partnership
3) Corporation
Sole Proprietorships LOGO

1) Sole proprietorship: a business which

is being run by one person. It’s the
simplest form of business ownership.
 Most popular form of business
organization

 Most common in:

 Retailing
 Service
 Agriculture`
Advantages of Sole Proprietorship LOGO

 Ease of Startup
Little legal documentation
 Least expensive to start
 Retention of profits
 No Business Income Tax
Disadvantages of Sole Proprietorship LOGO

 Unlimited Liability
 Limited Life – Business ends when
owner leaves the business
 Limited Capital
 Limited Access to Credit
 Limited Management Expertise
2 Partnership LOGO

When business is start up with two or

more people is known as partnership.

Almost 7.7% of all world businesses

consist of partnership

A least form of business

Advantages of Partnership LOGO

 Greater Access to Capital

 Greater Access to Credit
 Retention of Profits
 More Management Expertise
 No Business Income Tax
Disadvantages of Partnership LOGO

o Shared Profits
o Unlimited Liability for “General
Partners”
o Limited Life
o Business ends when any partner withdraws
o Management Disagreements
Corporation LOGO

Corporation is an organization which is

chartered by a state and given many
legal rights as an entity separate from
its owner.

It is the most common form of

business organization.
Advantages of Corporations LOGO

 Limited Liability
 Ease of Ownership Transfer
 Unlimited Life
 Greater Access to Capital
 Specialized Management Expertise
Disadvantages of Corporations LOGO

 More difficult & costly to form

 Governmental inspection
 Paper work
 Double taxation
What is a Bank LOGO

A Bank is an institution which deals

in money….

Commercial banks receives deposits

and advances loans to earn maximum
profits.

“A bank collects money from those

who have it spare or who are saving it
out of their incomes and advances it
to those who requires it. ”Crowther”
How bank works LOGO

Commercial bank accepts deposits

from individuals, firms and companies
at a lower rate of interest and gives it
at higher rate of interest to those who
need them.

The difference between the

terms at which it borrows
and those at which it lends
forms the source of its profit.
LOGO

Market Structure
Definition of Market LOGO

Market is an area where buyer and seller

meet with each other for the purpose of
exchange of goods and services for
money.
CLASSIFICATION OF MARKET LOGO

 TIME
Market can be classified into three main
categories according to time.

Very short period , Short Period Market,

and Long Period Market
CLASSIFICATION OF MARKET LOGO

 SPACE
According to this classification the market
can be divided into four categories.

Local Market, Regional Market, National

Market, or International Market.
CLASSIFICATION OF MARKET LOGO

 Commodities
A market can also be divided according to
the type of commodities it deals in. In this
division we have the following types of
market.
General Market, Specialized Market, Capital
Market, Foreign exchange Market etc
CLASSIFICATION OF MARKET LOGO

 Competition
 This kind of market can be divided as

1 Monopoly

2 Competitive Markets
1 MONOPOLY LOGO

Monopoly is a market where there is only

one seller of any commodity.

Monopoly refers to a market where there is a

single seller for a product and there is no close
substitute of product that is offered by the sole
supplier to the buyers. E.g. electricity, natural
gas etc
Features of Monopoly LOGO

1 There is only a single seller.

2 The commodity has no close substitute.
3 It is very difficult to enter or leave the
industry.
4 Firm and industry have a single identity.
COMPETITION LOGO

There are various kinds of imperfect

competition

1 Duopoly
2 Oligopoly
3 Monopolistic competition.
1 Duopoly LOGO

If there are only two firms in an industry and

they produce the major share of market, it is
known as Duopoly.

Like Pepsi and coca cola

2 Oligopoly LOGO

Oligopoly is the market in which there are

a few firms in an industry which controls
the supply of a commodity and each firm
produces the major share of market.

For Example Telecom industry, Air Lines

etc
3 MONOPOLISTIC COMPETITION LOGO

It is a blend of monopoly and competition.

Monopolistic competition is a market situation
in which there is fairly large number of sellers
and they produce slightly differentiated
products.
Like Soap Industry, showbiz industry, Banking
sector (Industry) etc
Features of Monopolistic competition LOGO

1 A fairly large numbers of sellers

2 Similar but not identical products
3 Close substitutes.
4 Selling (advertising) cost.
Examples of Monopolistic competition LOGO

Monopolistic
 Restaurants
or Imperfect
Competition
 Plumbers/electricians
 Private Schools/Colleges/Institutes
 Health clubs
 Hairdressers
 Estate agents
 Wedding Halls
 Local builders
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