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WEEK 3
MARKET STRUCTURES
Content
- Concept and Types of Markets
- Review of Cost and Revenue Cost
- Price and Quantity Determination under Perfect
Competition, monopoly, duopoly and oligopoly
Sub-topic One: Concept and Types of Market
Concept of Market
In everyday speech, market refers to a fixed place where people meet to buy and sell. But in relation to Economics, market does not necessarily refer to a fixed place. It is defined as any arrangement, system or organization whereby buyers and sellers of goods and services are brought into contact and can transact business with one another. The means of contact could be through internet, phone, letter or telegraphic system or a fixed place like the regular marketplace.
Types of Market
Market could be classified based on the types of commodities bought and sold (i.e. consumer goods market, labour market and capital and money market), or on the basis of channel of distribution (resale and wholesale market), or the bases of prices.
Under this discussion, we shall look at the type of market on the basis of prices.
Types of Market (On the Basis of Prices)
- Perfect Competition/Market
- Imperfect Competition/Market
Perfect Competition/Market
A perfect market is a market structure in which prices are determined by the forces of demand and supply. It is a market without government intervention. It should be noted that in the real world a perfect market does not exist in its pure form.
Features of a Perfect Market
- Free entry and free exit of buyers and sellers
- Homogenous commodity so there will be no room for consumer to prefer one to another
- Uniformity of prices. Each single competitor cannot influence price.
- Large number of buyers and sellers
- There are a large number of buyers and sellers such that no single person can influence price.
- Perfect knowledge of the market transactions available to everyone.
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