of 12
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.

Market

Category:

Documents

Publish on:

Views: 102 | Pages: 12

Extension: DOCX | Download: 0

Share
Description
Forms of markets
Transcript
     Abstract Present unit deals with the Concept of Market Structure which comprises of different market conditions under which the firms produce and sell products in the market. The unit also elaborates upon various Forms of Market Structure such as Perfect Market and * Imperfect Market (*Monopoly, Monopolistic Competition and Oligopoly). The conditions and determination of price under various Forms of Market Structure have been discussed. The content based classroom activity has been suggested at the end. It will help in developing Critical Thinking & Analytical ability among students which is the demand of this subject. Questions based on the content to check the progress have been included. Different types of Questions such as Very Short Answer Type, Short  Answer Type, and Long Answer Type questions (based on Board pattern) are also given under' Additional Questions ’   . List of URL’s have been mentioned in the end. You are requested to search those web links for more interesting details about the unit covered in the present module. This will enable you to develop more interesting Teaching- Learning Classroom Processes for children.    Market Structure and Forms of Market 1.    Market Structure Market Structure is also known as the number of firms producing identical products. Firm sells goods and services under different market conditions which economists call Market Structures. A Market Structure describes the key traits of a market, including the number of firms, the similarity of the products they sell, and the ease of entry into and exit from, the market examinations of the business sector of our economy reveals firms’ operating in different Market Structure.  Market Structure is best defined as the organizational and other characteristics of a market. These characteristics affect the nature of competition and pricing. 1.1 Elements of Market Structure 1.    Number and size, Distribution of Firms 2.   Entry Conditions 3.   Extent of Product Differentiation Types of Market Structure influences how a firm behaves regarding the following:    Price     Supply     Barriers to Entry       Efficiency     Competition   1.2   Determinants of Market Structure    Freedom of Entry and Exit      Nature of the Product: Homogeneous or Differentiated     Control over Supply /Output     Control over Price     Control to Entry   2 .   Forms of Market Main Forms of Markets | |________________________________| Perfect Market   Imperfect Market | |____________________-  _________|____________________________| Monopoly Monopolistic Competition Oligopoly  3 .   Perfect Competition Perfect Competition is a theoretical Market Structure that features unlimited contestability (No barriers to enter) and unlimited number of producers and consumers, and a Perfect    Elastic Demand Curve. Perfect competition is a market structure where an infinitely   large number of buyers and sellers operate freely and sell a homogeneous commodity at a uniform price. 3.1   Features of Perfect Competition 1.   Infinitely Large number of Buyers and Sellers When there is very large number of buyers no individual buyer can influence the market price. Similarly when there are a very large number of sellers, each firm or seller in a perfectly competitive market forms an insignificant part of the market. Therefore, no single seller has the ability to determine the price at which the commodity is sold. So   who determines the price in such a market?   In a perfectly competitive market, it is the forces of Market Demand and Market Supply that determines the price of the commodity.  Since each firm accepts the price that is   determined by the market, it becomes a Price Taker. As the market determines the Price, it is the Price Maker.    Example-1 Table- 1 Market Demand and Supply Price per Unit Demand (Units) Supply (Units) (Rs.) 10 1000 500 20 900 650 30 800 800 40 700 950 50 600 1100 Diagram showing Market is Price Maker and Firm is Price Taker In the Table and Diagram above, the forces of demand and supply equalize at a price of Rs.  30 per unit. This is   the Market Determined Price   under   Perfect Competition . Once the   market determines the price, each firm accepts it.  No firm in its individual capacity can alter the price given to it by the market. If any firm were to change a price higher than market determined price, buyers would shift  firm. No firm would like to charge a price lower than the market determined price, as by doing so it loses revenue. 2.   Homogenous Product In a perfect competitive market, firms sell homogeneous products. Homogenous  products are those that are identical in all respects i.e. there is no difference in  packaging, quality colors etc. As the output of one firm is exactly the same as the output of all others in the market, the products of all firms are perfect substitute for each other. 3.   Free Entry in to and Exit from the market Very easy entry into a market means that a new firm faces no barriers to entry. Barriers can be financial, technical or government imposed barriers such as Licenses, Permits and Patents . The implication of this feature of Perfect Competition is that while in the short run  firms can make either supernormal profits or losses, in the long run all firms in market earn only normal profits. 4.   Perfect Knowledge of Market Buyers and sellers have complete and perfect knowledge about the product and prices of other sellers. This feature ensures that the market achieves a uniform price level.  3.2    Shape of the AR and MR curves under Perfect Competition Since the firm under Perfect Competition is a Price Taker and cannot change the price it can change for its product, the Average Revenue ( which is equal to price ) is the same for all units of output sold. In this case, Marginal Revenue is also constant and equal to the Average Revenue.  Average Revenue Curve is also a Demand Curve facing a perfectly competitive firm, which is perfectly elastic. No real world market exactly fits the features of perfect market structure
Tags
Search Related
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks