market structure
DESCRIPTION
TRANSCRIPT
MARKET STRUCTURE
Prepared by: Arnel O. Rivera
MAT-SS
What is the market structure?
• The state of a market with respect to competition.
What are the main criteria used to distinguish the different market structure?
• Number and size of producers and consumers
• Types of goods and services being sold.
• Availability of information about the products being sold.
TYPES OF MARKET STRUCTURES
• Perfect competition
• Oligopoly (Monopolistic competition)
• Monopoly
• Monopsony
PERFECT COMPETITION
• A market in which there are many small firms, all producing the same goods.
• No single firm has influence on the price of the product it sells.
VS
PERFECT COMPETITION
Advantages Disadvantages• Helps allocate resources to
most efficient use• Encourages efficiency• Consumers benefit:
consumers charged a lower price
• Responsive to consumer wishes
• The conditions are very strict, there are few perfectly competitive markets
• Insufficient profits for investment
• Lack of product variety• Unequal distribution of
goods & income
MONOPOLY
• A market in which there are many buyers but only one seller
• A single firm selling all output in a market
MONOPOLY
Advantages Disadvantages
• Encourages R&D• Encourages innovation• Economies of scale
can be gained
• Exploitation of consumer – higher prices
• Potential for supply to be limited - less choice
• Potential for inefficiency
OLIGOPOLIES, CARTELS AND MONOPOLISTIC COMPETITIONS
• Oligopoly - there are few sellers and many unidentified buyers.
• Monopolistic competition – there are a few sellers supplying the market with different types of brands of the same product and capturing a specific group of buyers for a particular brand.
• Cartels – sellers agree to coordinate prices and production.
EXAMPLES:
EXAMPLES:
OLIGOPOLIES, CARTELS AND MONOPOLISTIC COMPETITIONS
Advantages Disadvantages
• Products differentiated• Firm has some control
over price• Products could be
highly differentiated • Non–price competition• Price stability within
the market
• High barriers to entry• Potential for conspiracy• Abnormal profits• High degree of
interdependence between firms
MONOPSONY
• Single buyer faces many sellers• A form of imperfect competition• Sells products with higher price• Buys material with lower price
MONOPSONY
Advantages Disadvantages
• Lower cost• Dictate exact
specifications to suppliers
• Don’t have risks
• Abnormal profits• Unequal distribution of
goods & income
SUMMARY
Market Structure
Seller Entry Barriers
Seller Number
Buyer Entry Barriers
Buyer Number
Perfect Competition
No Many No Many
Monopolistic competition
No Many No Many
Oligopoly Yes Few No Many
Monopoly Yes One No Many
Monopsony No Many Yes One
CONCLUSION:
• Market structure can be described with reference to different characteristics of a market, including its size and value, the number of providers and their market share, consumer and business purchasing behavior, and growth forecasts
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