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Market structure : In economics, market structure (also known as the number of firms producing identical products). Two Basic Types of Market Structure are:
Perfect Market Imperfect Market
PERFECT MARKET: In Economics a perfect market is defined by several conditions, collectively Perfect competition. Among these conditions are
called
Free entry and exit to industry Homogenous product – identical so no consumer preference Large number of buyers and sellers – no individual seller can influence price Sellers are price takers – have to accept the market price Perfect information available to buyers and sellers Examples of perfect competition: Financial markets – stock exchange, currency markets, bond markets? Agriculture?
IMPERFECT MARKET : In Economics a Imperfect market is defined by several conditions, collectively called Imperfect competition. Among these conditions are Many buyers and sellers Products differentiated
[email protected] Relatively free entry and exit Each firm may have a tiny ‘monopoly’ because of the differentiation of their product Firm has some control over price
Examples Restaurants, professions – solicitors, etc., building firms – plasterers, plumbers, etc.
Imperfect market types are Monopoly Oligopoly Duopoly
Monopoly Monopoly market situation where a single seller exists and has complete control over an industry EXAMPLE: SSGC, KESC, PAKISTAN RAILWAY,KW&SB OR A situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition (for example, vast economies of scale, barriers to entry, or governmental regulation). In such an industry structure, the producer will often produce a volume that is less than the amount which would maximize social welfare. Pure monopoly – industry is the firm! Actual monopoly – where firm has >25% market share Natural Monopoly – high fixed costs – gas, electricity, water, telecommunications, and rail
Oligopoly
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In Economics a oligopoly market is defined by several conditions, collectively called oligopoly competition. Among these conditions are Industry dominated by small number of large firms Many firms may make up the industry High barriers to entry Products could be highly differentiated – branding or homogenous Non–price competition Price stability within the market - kinked demand curve? Potential for collusion? Abnormal profits High degree of interdependence between firms OR A market dominated by a small number of participants who are able to collectively exert control over supply and market prices. Examples of oligopolistic structures: Supermarkets Banking industry Chemicals Oil Medicinal drugs Broadcasting Cements Automobiles
DUOPOLY A situation in which two companies own all or nearly all of the market for a given type of product or service. OR In a duopoly the market is controlled by two dominant firms. An example of duopoly is the global aircraft market, where the two dominant firms are AIRBUS & BOEING.
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