Market Structures
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.
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.
