From the viewpoint of competition the types of market structures in economics are the following:. The Market Structure can be shown by the following chart:. Thus , there are two extremes of market structure. On the one hand, we have perfect competition or pure competition and monopoly on the other hand. In between these two extremes have imperfect competition consisting of monopolistic competition, oligopoly, and duopoly.
The various forms of the market structure are discussed below:. A market structure where a large number of buyers and sellers selling homogeneous product and the price is determined by the industry.
All the times sell the product at one price. Perfect competition prevails when the demand for the output of each product is perfectly elastic. This entails first, that number of sellers is large, so that the output of any other seller is a negligible smaller portion of the total output of the commodity.
Thus , we can say that perfect competition is characterized by a large number of buyers and sellers with identical product selling on the price with the perfect mobility of factors and perfect knowledge of market conditions not influenced by either individual seller or buyer in finalizing transactions.
English economists believe that there is perfect competition while American economist supports the concept of pure competition. In pure competition, there is a lack of elements there are certain elements in existence. The following are the salient features of the Pure competition:. There is neither perfect competition nor pure monopoly market structures in practice. Monopolistic competition is a market structure in between perfect competition and Monopoly. It has some of the characteristics of perfect competition and some of the characteristics of the monopoly.
Thus , Monopolistic competition is a market situation in which there are many sellers of a particular product, but the product of each seller is in some way differentiated in the minds of consumers from the product of every other seller.
Monopolistic competition is there market structure in which there is co-existence of competition and Monopoly to some degree. Another type of market structure based on competition is Imperfect competition. There is a small number of firms selling differentiated products.
Imperfect competition in the stage between perfect competition and monopoly. Competition is said to be Imperfect if the number of sellers is limited and there is product differentiation. On the basis of definitions of Imperfect competition we can say that the following are the salient features of imperfect competition :. Oligopoly is also known as the competition among law. Oligos mean few and Pollen means to sell. Thus , when an oligopoly firm sells a homogeneous product it is called Homogeneous Oligopoly.
Whereas when a firm of an Oligopoly industry sale differentiated the product, It is called Heterogeneous Oligopoly. It is also known as differentiated Oligopoly. Oligopoly , in which a market is run by a small number of firms that together control the majority of the market share.
Market structure is also based on the number of buyers. It may be of the following types:. A market where there is a single bar of a commodity or service is called Monopsony. A market where there are two buyers of a commodity or product is called Duopsony market. A market structure in which there are few buyers of a product the market is called Oligopsony. These buyers can influence the price in the market by an agreement of association. A market wherein there are two sellers or producers of a product is called do a Duopoly.
They have a complete hold over the supply of that product. A product of both the sellers is Homogeneous and the prices are also the same. Both the firms are interdependent and they try to keep the same price. If a seller of the commodity lowers the price then the other seller is forced to reduce its price because customers will prefer to purchase the cheaper commodity. Both the sellers have to think about the possible impact when they are taking independent decisions relating to price and prediction.
In order to maximize the profits of each , they may form an association or can share the market and can charge high prices for the customers. An important feature of the market economy is that there is limited control of the government. Organizations and individuals take all the important decisions regarding production, consumption, prices policy, etc.
However, the role of government is to make sure that no organization is restricting competition in the market by creating a monopoly, and the government also make sure that the market is open and working. In the market economy, players of the market have the freedom to choose what and how much they want to produce and sell in the form of product and services.
They can use various strategies to get a competitive edge in the market. Competition is a driving feature of the market economy. In addition to this, the competition also enables producers to produce goods and services of higher quality. For example, people consider two factors one is price, and another is the quality of a product before making a purchase decision. Therefore, companies try to provide products of higher quality at the lowest prices possible.
However, competition not only impacts the competitors in the market, but it also put pressure on workers and consumers. Market economies give freedom to individuals and organization to own private properties. People can buy and sell things and can own them privately and use them to make profits. Buyers are required to make legally-binding contracts to own properties.
However, there are a few things that the government restrict people to own privately and buy and sell. For example, it is illegal to sell and buy human beings and sources of natural resources. An interesting feature of the market economy is the selfish motives of individuals behind running businesses. All their actions and business decisions are motivated by the desire to make the highest profits. This might sound bad, but it is beneficial for the economy in the long run. It also gives a clear picture of supply and demand in the market.
Market economies run on buying and selling goods and services. All the players in the market have equal access to the information. They use that information to make maximum profits. However, prices of products and services vary based on the supply and demand in the market.
This type of market economy is an economic system where businesses are completely or largely privately-owned. People who own businesses work for selfish motives, and their main motive is to generate maximum profit at the lowest costs. In this market economy system, capitalists have the power to determine investment, production, distribution, and prices, etc.
There are various forms of the capitalist market based on its relationship with the market. Let us learn about the different types of capitalism market economy.
In a free-market economy, the prices of goods and services are decided based on supply and demand. As a result of which prices of goods become high when there is high demand and prices drop in case of lower demand in the market. However, government policies are applied to break the equilibrium of supply and demand cycle. Laissez-Faire market economy system is referred to the market system, which is completely free from any type of government intervention.
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