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    Types of Market (2nd Quarter)

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    Vanessa abad
    Applied Economics

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    Types of Market (2nd Quarter)

    Uploaded by

    Vanessa abad
    3 views3 pages
    Applied Economics

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    Types of market (2nd Quarter)

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    © © All Rights Reserved

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    DOCX, PDF, TXT or read online from Scribd

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    Applied Economics

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    3 views3 pages

    Types of Market (2nd Quarter)

    Uploaded by

    Vanessa abad
    Applied Economics

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 3

    LESSON 8

    MARKET TSTRUCTURE

    OBJECTIVES:
    1.Explain the concept of market structure and;
    2. Discuss the importance in understanding the behavior of firms in different industries.
    3. Compare and contrast different market structures, understanding their characteristics,
    advantages and disadvantages.

    Market Structure is best defined as the organizational and other characteristics of market.
    There are four basic types of market structures by traditional economic analysis:
    1. Monopoly
    2. Oligopoly
    3. Perfect competition
    4. Monopolistic competition

    MONOPOLY
    o Is a market structure in which there is only one producer/seller for a product.
    o A government can create a monopoly over an industry that it wants to control, such as
    electricity.

    CHARACTERISTICS OF MONOPOLY
    1. Maximizes profits;
    2. Decides the price of good or product to be sold, but does so by determining the quantity
    in order to demand the price desired by the firm;
    3. Other sellers are unable to enter the market of the monopoly;
    4. There is one seller of the good that produces all the output. The whole market is being
    served by a single company, and for practical purposes, the company is same as
    industry;
    5. A monopolist can change the price and quality of the product.
    OLIGOPOLY
    o There are only a few firms that make up an industry.
    o This selects group of firms has control over the price, like monopoly, an oligopoly has
    high barriers to entry.
    o The products that the oligopolistic firms produce are often nearly identical.

    CHARACTERISTICS OF OLIGOPOLY
    1. Maximizes profits;
    2. Price setters rather than price takers;
    3. Barriers to entry are high
    4. There are so few firms that the actions of one firm can influence the actions of the other
    firms;
    5. Oligopolies can retain long run abnormal profit. High barriers of entry prevent sideline
    firms from entering the market to capture excess profits;
    6. Product may be homogeneous or differentiated;
    7. Oligopolies have perfect knowledge of their own cost and demand functions but their
    inter-firm information may be incomplete.

    PERFECT COMPETITION
    o Is characterized by many buyers and sellers, many products that are similar in nature
    and, as a result, many substitutes.
    CHARACTERISTICS OF PERFECT COMPETITION
    1. There is perfect knowledge, with no information failure or time lags in the flow of
    information
    2. Given that producers and consumers have perfect Knowledge, it is assumed that they
    make rational decisions to maximizes their self-interest consumers look to maximize
    their utility, and producers look to maximize their profits.
    3. There are no barriers to entry into or exit out of the market.
    4. Firms produce homogenous, identical, units of output that are not branded
    5. No single firms can influence the market price, or market conditions.
    6. There are many firms in the market
    7. There is no need for government regulations
    8. Firms can only make normal profit in the long run

    MONOPOLISTIC COMPETITION
    o Is a type of imperfect competition such that one or two producer sell products that are
    differentiated from one another as goods but not perfect substitute (such as from
    branding, quality, or location)

    CHARACTERISTICS OF MONOPOLISTIC COMPETITION


    1. There are many producers and many consumers in the market, and no business has
    total control over the market price.
    2. Consumers perceive that there are non- price differences among the competitors’
    products.
    3. There are few barriers to entry and exit.
    4. Producers have the degree of control over price.

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