Market structure refers to the type of market based on the number of sellers, type of
product, competition level, and control over price.
There are four major types:
1️⃣ Perfect Competition
Characteristics:
● Large number of buyers and sellers.
● All firms sell identical (homogeneous) products.
● Free entry and exit of firms.
● Buyers and sellers have perfect knowledge of prices.
● No single seller can influence price → firms are price takers.
Examples: Agriculture markets (wheat, rice, vegetables).
2️⃣ Monopoly
Characteristics:
● Only one seller in the market.
● No close substitutes for the product.
● High barriers to entry (legal, technological, or financial).
● The firm controls output and price → price maker.
● Demand curve is downward sloping.
Examples: Railways (in many countries), patented medicines.
3️⃣ Monopolistic Competition
Characteristics:
● Many sellers, but not as many as perfect competition.
● Product differentiation (brands, design, quality).
● Free entry and exit of firms.
● Firms have partial control over price.
● Focus on advertising and branding.