Imperfect markets

• It’s almost impossible to find perfectly

competitive markets in the real world as it is
extremely difficult to meet all the conditions
of such a market. Therefore, imperfect
markets are quite common in the real world,
and you can find them in many places.
• An imperfect market contains buyers and
sellers who can influence not just the price but
also the production of goods and services.

• Additionally, those in an imperfect market

don’t fully disclose all the information about
their goods and services.
• In contrast, a perfect market contains infinitely
many buyers and sellers, and none of those
can influence the price
 Types of imperfect markets

• There are different market structures in which

the price or production can be influenced in
different ways. Let's see some of the most
common types of imperfect markets.
 Monopoly
• In this type of imperfect market, we only have
one dominant seller that can influence the
price of goods or services they produce. This
influence enables the dominant seller to do so
because there is no substitute for their
products, so buyers are left without many
choices.
• For example Google has over 90% of search
engine traffic and can be considered a
monopoly in India.
 Oligopoly
• In this market structure, there is a small
number of firms with a very high market
share. These firms can influence the price of
their goods and services and provide huge
barriers for new firms to enter the market.

• Airbus and Boeing are good examples of

oligopoly market structures. In this type of
market, you have these two companies
producing almost 80% of the world’s
commercial aircraft.
 Monopolistic competition

• Monopolistically competitive markets are

types of imperfect markets that have many
sellers that offer products for which there are
no substitute and their products are not
identical. All of these businesses compete with
each other solely based on the differentiation
of their product from others.
 Monopsonies
• Monopsonies are somewhat different from
monopoly. The main difference is that in their
case, instead of having many buyers, they
have many sellers but few buyers, which then
influences their prices.
• For example There are many tobacco sellers in
the world, but there are only a few large
companies that produce cigarettes. These few
companies are the buyers who buy from many
tobacco sellers in the world. They can easily
negotiate and bring down the prices.