MARKET STRUCTURE

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MARKET STRUCTURE
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Learning focus

• Concept of the market structure
• Perfect and imperfect competition
• Identify monopoly, oligopoly and monopolistic
  competition with examples.
• Features of different market structures.
• A market is where sellers meet buyers to exchange
  goods or services through the co-ordination of a
  price system (P.241).

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What is a
MARKET ?
Too Simple !
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What is a
MARKET ?
In Economics, a market is defined as a context in
which exchange of goods and services between
sellers and buyers takes place.
A market exists whenever a transaction is made.
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1. ?????,????????????? ?????
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Definition of market structure

• Market structure (P.242) is the set of conditions
  under which buyers and sellers interact in the
  market (???????????????????).
• There are different relationships between buyers
  and sellers. These lead to different market
  structures.

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Concept Tour
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Perfect Competition

• Four features (P.243)
• 1. Large No. of Buyers Sellers (????????????)
• 2. Homogeneous??Products
• 3. Free??Entry? Exit?
• 4. Perfect??Market Information??

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Perfect Competition

• Large No. of Buyers Sellers
• the action of an individual buyer or seller is
  unable to affect the market price

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Perfect Competition

• Homogeneous Products
• the products in the market must be identical in
  the eyes of consumers

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??????????????????
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Perfect Competition

• Free Entry and Exit
• No restriction.

Welcome to Perfectly Competitive Market
Exit!!
Entry!!
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Perfect Competition

• Perfect Market Information
• Buyers Sellers know all market information
  about goods e.g.

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Perfect Competition

• Example
• The stock exchange is a close (but not) example

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Imperfect competition

• The market is under imperfect competition (P.242)
  when some of the four conditions for perfect
  competition do not exist.
• There are many types of imperfect competition,
  depending on which condition is not met.
• In the real world, market competition tends to be
  imperfect.
• Guided MCQ Practice
• Guided Essay Class Work Practice

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Monopoly

• Four Features
• Only One seller in the whole market
• No close substitute
• Highly Difficult (even impossible) to Entry
• Imperfect (highly restricted) Market Information

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Monopoly

• Only One Seller in the Whole Market
• buyers can obtain the goods or services from the
  monopolist only

You can only buy my product! woo...woo...
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Monopoly

• Highly Difficult (even impossible) to entry
• it is because of monopoly power

• Sources of Monopoly Power
• government ownership
• government franchise
• ownership of important resources
• huge capital requirement economies of scale

No Entry!!
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Monopoly

• No Close Substitutes
• buyers are difficult to find another good to
  satisfy the same want

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Does a monopolist face competition?(P.247)

• Real World Example

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Why do monopolies exist? (P.249)

• Real World Example NM
• Real World Example GO
• Real World Example I
• Real World Example P

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Oligopoly

• Features
• 1. A Few Dominant Sellers
• 2. Entry is Restricted
• 3. Similar but Differentiated Products
• 4. Imperfect Market Information

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Oligopoly

• A few dominant sellers
• Oligopolists have to consider the reactions of
  other firms before making any decision

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Oligopoly

• Similar but Differentiated Products
• the products are close substitutes to one another

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Oligopoly

• Entry is Restricted
• it is difficult because of government regulation
  / huge capital / technological requirements

Entry?
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Oligopoly
Examples
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Examples of oligopolies (P.253)

• Guided Essay Class Work Practice

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Monopolistic competition (P.256)

• Monopolistic competition refers to a market where
  some of the characteristics of monopoly and
  perfect competition are present.

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Monopolistic Competition

• Four Features
• 1. Large No. of Buyers Sellers
• 2. Differentiated Products
• 3. Free Entry Exit
• 4. Imperfect Market Information

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Monopolistic Competition

• Product Differentiation
• A firm can use product differentiation to promote
  sales.
• Techniques are

• new designs
• advertising
• brand name

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Monopolistic Competition

• Imperfect Information of the Market
• Sellers Buyers dont have perfect info. on
  price quality of goods

?
?
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Monopolistic Competition

• Example Guided MCQ Practice
• Rice is an example
• Multimedia Showroom
• Guided MCQ Practice

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Summary
Monopoly Oligopoly Monopolistic Perfect
Competition Competition
1. No. of sellers
A few dominant sellers
One
Many
Many
2. No. of buyers
Many
Many
Many
Many
3. Products nature
Heterogeneous / homogeneous
Heterogeneous / homogeneous
Heterogeneous
Homogeneous
4. Ease of entry
Forbidden
Restricted
Free entry
Free entry
5. Information availability
Perfect Information
Restricted
Restricted
Imperfect
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Revision (1)
Oligopoly
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Revision (2)
Monopolistic Competition