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UNIT 4 �FORMS OF MARKET

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MEANING AND FORMS OF MARKET

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MEANING OF MARKET

Market refers to a mechanism or an

arrangement that facilitates contact

between the buyers and sellers for the

sale and purchase of goods and

services.

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CATEGORISATION OF MARKET

Market can be categorised into two categories

1. Perfect Competition Market

2. Imperfect Competition Market

Perfect knowledge and perfect mobility are

those two points that differentiate a market

into two categories.

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FORMS OF MARKET

Depending on the degree of competition or number of firms in the market,a market is often described as one of the following forms –

  • Perfect Competition Market
  • Monopoly Market
  • Monopolistic Competition Market
  • Oligopoly Market

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PERFECT COMPETITION

A form of market where there is a large number

of sellers and buyers of a commodity and no

individual buyer or seller has any control over its

price. Product is homogeneous and its price is

determined by the forces of market demand

and market supply

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EXAMPLE

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FEATURES OF PERFECT COMPETITION

  • Large Number of Small Buyers and Sellers
  • Homogeneous Products
  • Perfect knowledge
  • Freedom of Entry and Exit
  • Perfect Mobility
  • Perfectly Elastic Demand Curve
  • No Selling Cost
  • Normal Profit

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MONOPOLISTIC COMPETITION

It is a form of the market in which there are many sellers of the product but the product of each seller is different from that of the Other. Thus, there are many sellers selling a differentiated product.Product differentiation is generally promoted through trademark or brand name.

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EXAMPLE

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FEATURES OF MONOPOLISTIC COMPETITION

  • Large number of Buyer and Seller
  • Freedom of Entry and Exit
  • Lack of Perfect Knowledge
  • Lack of Perfect Mobility
  • Product Differentiation
  • Non-price Competition
  • Selling Cost
  • Downward Sloping Demand Curve

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OLIGOPOLY MARKET

It is a form of the market in which there are a

few big firms and a large number of buyers of

the commodity.Each firm has a significant

share of the market and output.There is a high

degree of interdependence among the

competing firms.

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CLASSIFICATION OF OLIGOPOLY

Oligopoly is broadly classified as-

Collusive Oligopoly

Non-collusive Oligopoly

  • In Collusive oligopoly,firms form a cartel to avoid competition.
  • In Non-collusive oligopoly,there is a cut-throat competition and a high degree of interdependence among the firms.

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EXAMPLE

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FEATURES OF OLIGOPOLY

  • Small Number of Big Firms
  • High Degree of Interdependence
  • Formation of Cartels
  • Entry Barriers
  • Non-price Competition
  • Lack of Perfect Knowledge
  • Lack of Perfect Mobility

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MONOPOLY

It is a form of the market in which

there is a single seller of a product

with no close substitute.

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EXAMPLE

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FEATURES OF MONOPOLY

  • One Seller and Large Number of Buyers
  • Restrictions on the Entry of New Firms
  • No Close Substitute
  • Full Control Over Price
  • Price Discrimination
  • Lack Of Perfect knowledge
  • Lack of Perfect Mobility

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EMERGENCE OF MONOPOLY STRUCTURE

  • Government Licensing / Government Control
  • Patent Rights
  • Cartels
  • Natural Occurrence

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Principal Basis of Market Classification

  • Number of Buyers and Sellers
  • Nature of the Commodity
  • Degree of Price Control
  • Knowledge of the Market
  • Mobility of Factors
  • Freedom of Entry and Exit
  • Level of Profit
  • Selling Cost

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THANKYOU

EFFORTS BY

SAROJ KUMARI

PGT ECONOMICS