Lesson Objectives:
•Explain the different market structures
•Analyze the effects of contemporary issues,
such as migration, fluctuations in the
exchange rate, oil price increases,
unemployment, peace and order, etc., on
the purchasing power of people
•Understand the application of the law of
supply and demand in the different sectors

Let’s Have a Forum!
• In a yellow paper, make a stand or point through
an essay about this question:

The Perfect Competitionis a market structure where a large
number of buyers and sellers are present, and all are
engaged in the buying and selling of the homogeneous
products at a single price prevailing in the market.

In other words, perfect competition also referred to as a pure
competition, exists when there is no direct competition
between the rivals and all sell identically the same products at
a single price.

1.Large numbers of buyers and sellers
2. Homogenous product
3. Free entry and exit
4. No transportation cost
5. Absence of government and
artificial restrictions

In perfect competition, the
buyers and sellers are
large enough, that no
individual can influence
the price and the output of
the industry.

An individual customer cannot
influence the price of the product,
as he is too small in relation to the
whole market. Similarly, a single
seller cannot influence the levels of
output, who is too small in relation
to the gamut of sellers operating in
the market.

Each competing firm offers the
homogeneous product, such that no
individual has a preference for a
particular seller over the others.
Thus, an increase in the price would
let the customer go to some other
supplier.

Under the perfect competition, the
firms are free to enter or exit the
industry. This implies, If a firm
suffers from a huge loss due to the
intense competition in the industry,
then it is free to leave that industry
and begin its business operations in
any of the industry, it wants. Thus,
there is no restriction on the
mobility of sellers.

There is an absence of transportation cost, i.e. incurred in carrying the
goods from one market to another. This is an essential condition of the
perfect competition since the homogeneous product should have the same
price across the market and if the transportation cost is added to it, then
the prices may differ.

Under the perfect competition, both the buyers and sellers are free to
buy and sell the goods and services. This means any customer can
buy from any seller, and any seller can sell to any buyer. Thus, no
restriction is imposed on either party. Also, the prices are liable to
change freely as per the demand-supply conditions. In such a
situation, no big producer and the government can intervene and
control the demand, supply or price of the goods and services.

Under a
perfect
competition
, a seller
is a price
taker and
cannot

A market structure
characterized by a single seller,
selling a unique product in the
market. In a monopoly market,
the seller faces no competition,
as he is the sole seller of goods
with no close substitute.

In a monopoly market, factors like
government license, ownership of
resources, copyright and patent and
high starting cost make an entity a
single seller of goods. All these factors
restrict the entry of other sellers in the
market. Monopolies also possess some
information that is not known to other
sellers.

Characteristics associated
with a monopoly market
make the single seller the
market controller as well as
the price maker. He enjoys the
power of setting the price for
his goods.

Although monopolist is a “price maker,” he is not
allowed to change any price he wants for utilities like
water and electricity. Specific government agencies
control their prices.

In the Philippines, MERALCO first submits a proposal for an
increase in electricity price to government agencies (Energy
Regulatory Board). Then the public sector is informed of such
increase and consultations are made before implementing the
increase.

1. Single seller and a lot
of purchasers
2. Unique goods
3. High barriers to entry

Monopoly is a formof imperfect market because the produce the goods and give
the services is by one single seller or monopolist. A price of goods andservice is
also fully control by one seller. Therefore, if the prices of the goods rise up,
consumers needto accept andpay higher prices to buy the goods and service.

Monopoly market producing unique goods,
they do not have close substitutes in the
market place. Monopoly market is freedomto
change the cost of the goods or services.
Example of Windows company, they are using
theirown idea to formtheirown goods and
service, which is Microsoft. There do not have
any other substitutes in this market.

A monopoly in the market is a strong
barrier to enter the new or others
industry. Monopoly does not face
competition because do not have other
competitor produce same product to
enter the market. It is limit on others
new industry and hard to enter in this
monopoly market.

Oligopoly is another form of
imperfect market structures. In
an oligopoly, there is more than
one seller but they remain to be
few so that a considerable degree
of market power is exercised.

1. Profit maximization condition
2. Oligopolies are price setters
rather than price takers
3. Barriers to entry are high
4. Product may either be
homogenous or differentiated

A cartel is a group of apparently
independent producers whose goal
is to increase their collective profits
by means of price fixing, limiting
supply, or other restrictive practices.
Cartels typically control selling
prices, but some are organized to
force down the prices of purchased
inputs.

Competition in this kind of market
structure collude. They play either as
one teamor as different teams. There
are fewsellers that prefer to make
alliances than to compete. In a duopoly
where there are two sellers, it is best if
they work together rather than to
compete with each other. They can also
cooperate, but they pretendto compete
with each other.

Monopsony is a market
structure wherein a single
buyer substantially controls the
market as the major purchaser
of goods and services offered by
many would-be sellers.

The classic example of a monopsony is
a company coal town, where the coal
company acts the sole employer and
therefore the sole purchaser of labor in
the town. Now why should we care
about this? The monopsony power of
the coal company allows it to set wages
below the productivity of their workers.
In other words, employers gain the
power to depress wages.

Like a
monopoly
seller, a
monopsony
buyer is a
price maker

1. Single Buyer
2. No Alternatives
3. Barriers to entry

First and foremost, a monopsony is
a monopsony because it is the only
buyer in the market. The word
monopsony actually translates as
"one buyer." As the only buyer, a
monopsony controls the demand-
side of the market completely. If
anyone wants to sell the good, they
must sell to the monopoly.

A monopsony achieves single-buyer
status because sellers have no
alternative buyers for their goods.
Thisis the key characteristics that
usually prevents monopsony from
existing in the real world in its pure,
ideal form. Sellers almost always
have alternatives.

A monopsony often acquires and
generally maintains single buyer
status due to restrictions on the entry
of other buyers into the market. The
key barriers to entry are much the
same as those that exist for monopoly:
government license or franchise,
resource ownership, andpatents and
copyrights.

A market characterized by a small
number of large buyers controlling the
buying-side of a market. Oligopsony is
the buying-side equivalent of a selling-
side oligopoly. Much as a oligopoly is a
market dominated by a few large
sellers, oligopsony is a market
dominated by a few large buyers.

This market structure is the
somewhat obscure and less noted
buying counterpart of oligopoly.
However, oligopsony tends to be
just as prevalent in the real world.
In fact, firms operating as oligopoly
in an output market often operate
as oligopsony in an input market.

The reason the
term oligopsony is
seldom used is
that the term
oligopoly usually
covers the entire
range of output
selling AND
INPUT BUYING
activities.

If, for example, a few firms dominate
the output market for computers as
oligopoly sellers, then they are also
likely to dominate the input market
for computer components, such as
silicon chips, hard disk drives, and
programmers, as oligopsony buyers. If
a few firms are oligopoly sellers of
gasoline, then they are also likely to be
oligopoly buyers of petroleum.

1. Small number of large buyers
2. Few Alternatives
3. Barrier to entry

An oligopsony market is
dominatedby a small number of
large buyers, each of which is
relatively large comparedto the
overall size of the market. This
generates substantial market
control, the extent of market
control depending on the number
andsize of the buyers.

An oligopsony arises because
sellers have few alternatives
available for the goods they
sell. While alternative buyers
might exist, they tend to be
less desirable.

Firms in a oligopsony market attain
and retain market control through
barriers to entry. The most common
barriers to resource ownership,
government franchises, start-up cost,
brand name recognition, and
decreasing average costs. Each of
these make it extremely difficult, if
not impossible, for potential
competitors to enter the market.

This kind of market
structure refers to many
firms selling differentiated
products. This means that
product of the same industry
seemto be the same but they
are actually not.

In this market structure,
customer’s loyalty is experienced
by the seller, when certain
consumer’s prefer their brand
over others.

1. Large Number of Buyers and Sellers
2. Free Entry and Exit of Firms
3. Product Differentiation
4. Lack of Perfect Knowledge
5. More Elastic Demand

There are large number of
firms but not as large as
under perfect competition.
That means each firm can
control its price-output
policy to some extent.

Like perfect competition, under
monopolistic competition also,
the firms can enter or exit freely.
With the entry of new firms, the
supply would increase which
would reduce the price and hence
the existing firms will be left only
with normal profits.

Another feature of the monopolistic
competition is the product
differentiation. Product
differentiation refers to a situation
when the buyers of the product
differentiate the product with other.
Basically, the products of different
firms are not altogether different.

This product differentiation
may be real or imaginary. Real
differences are like design,
material used, skill etc. whereas
imaginary differences are
through advertising, trade
mark and so on.

The buyers and sellers do not
have perfect knowledge of the
market. There are innumerable
products each being a close
substitute of the other. The
buyers do not know about all
these products, their qualities
and prices.

Under monopolistic
competition, demand curve
is more elastic. In order to
sell more, the firms must
reduce its price.

Graphic Organizer
The students will make a graphic organizer
portraying their understanding of the
different market structures.
They will use the framework provided by
the teacher.

Market
Structure
Description
No. of
Buyers
No. of
Sellers
Products