F O R M S O F M A R K E T

CONTENTS
1
Market
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2
Forms of market
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3
Perfect competition
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4
Monopoly
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5
M onopolistic
compeetition
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6
Oligoploy
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MARKET
MARKET - a means by which the exchange of goods and
services takes place as a result of buyers and sellers being in
contact with one another, either directly or through mediating
agents or institutionsA market is defined as the sum total of all
the buyers and sellers in the area or region under consideration.
A market is defined as the sum total of all the buyers and sellers
in the area or region under consideration.

Perfect competition is a unique form of the marketplace that allows multiple companies to sell the same product or service. Many consumers are looking to purchase those
products. None of these firms can set a price for the product or service they are selling without losing business to other competitors.In economic theory, perfect competition
occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full
information, and companies cannot determine prices.Examples of perfect competitionAgricultural markets. In some cases, there are several farmers selling identical products
to the market, and many buyers.
PERFECT COMPETITION

FEATURES OF PERFECT COMPETITION
• 1) Under perfect competition, there are so many buyers and sellers that no individual buyer or seller
can influence the price of the commodity in the market. Any change in the output supplied by a single
firm will not affect the total output of the industry. No individual buyer can influence the price of the
commodity by his decision to vary the amount that he would like to buy, i.e.,price of the commodity is
given to the buyer. He is a price-taker having no bargaining power in the market
• 2) The industry is characterized by freedom of entry and exit of firms. In a perfectly competitive market,
there are no barriers to entry or exit of firms.
• 3) It possess perfect knowledge. This means both buyers and sellers are fully informed about the
market price. Therefore, no firm is in a position to charge a different price and buyers will not pay a
higher price. As a result, a uniform price prevails in the market.
• 4) Due to homogeneous product or identical in every respect like quantity, colour, size and shape, etc.
The producers are perfect substitutes of one another. As a result both buyers and sellers have perfect
knowledge, about the inputs used in production.

Monopoly
A monopoly is a firm who is the
sole seller of its product, and
where there are no close
substitutes. An unregulated
monopoly has market power and
can influence prices. Examples:
Microsoft and Windows, DeBeers
and diamonds, your local natural
gas company.AA 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.

FEATURES OF MONOPOLY
• (1) Single Seller and Many Buyers: In Monopoly market, there is only one seller or producer and
many buyers. Monopoly firm does not have a rival in the market. So there is no competition.
• (2) No Close Substitute: The commodity produced by the monopolist does not have close substitute.
Hence, they do not face any competition.
• (3) Entry Barriers: The fact that there is only one firm under monopoly means that other firms are
restricted from entering the market. The entry barriers may be natural, legal or financial in nature.
• (4) Firm Coincides with Industry: In monopoly market, the firm and industry are one and the same. In
other words, there is no distinction between firm and industry.
• (5) Price Maker: In monopoly the seller is a 'Price Maker', since the monopolist has control over the
supply he can determine the price of his product.
• (6) Profit Maximisation (super normal profit): A monopolist earns super normal profit. His decision
regarding the price and the level of output are guided by profit maximisation motive.
• (7) Control Over Supply: The monopolist has a complete hold over market supply as he is the sole
producer.
• (8) Price discrimination: This implies charging different prices for the same product to different byere

MONOPOLISTIC COMPETITION
M o n o p o l i s t i c c o m p e t i t i o n e x i s t s w h e n m a n y c o m p a n i e s o f f e r c o m p e t i n g p r o d u c t s o r s e r v i c e s t h a t a r e s i m i l a r , b u t n o t p e r f e c t ,
s u b s t i t u t e s . T h e b a r r i e r s t o e n t r y i n a m o n o p o l i s t i c c o m p e t i t i v e i n d u s t r y a r e l o w , a n d t h e d e c i s i o n s o f a n y o n e f i r m d o n o t d i r e c t l y
a f f e c t i t s c o m p e t i t o r s . U n l i k e p e r f e c t c o m p e t i t i o n , t h e c o m p a n y m a i n t a i n s s p a r e c a p a c i t y . M o d e l s o f m o n o p o l i s t i c c o m p e t i t i o n a r e
o f t e n u s e d t o m o d e l i n d u s t r i e s . T e x t b o o k e x a m p l e s o f i n d u s t r i e s w i t h m a r k e t s t r u c t u r e s s i m i l a r t o m o n o p o l i s t i c c o m p e t i t i o n i n c l u d e
r e s t a u r a n t s , c e r e a l s , c l o t h i n g , s h o e s , a n d s e r v i c e i n d u s t r i e s i n l a r g e c i t i e s .
Nike✓ Woodland Colgate

FEATURES OF MONOPOLISTIC COMPETITION
• i. Large number of buyers and sellers - There are a large number of buyers and sellers in a
monopolistic market.
• ii. Differentiated product - Products of a firm are slightly different from those of other firms, but they
are close substitutes. Product differentiation is achieved through brand name, trade mark and
advertisements.
• iii. Selling cost - The need of the selling cost arises due to the sole aim of differentiating products. It
is through the help of advertisements that a monopolistic firm tries to convince the consumers by
distinguishing its product from its substitutes on qualitative basis.
• iv. Free entry and exit of firms - The firms in the monopolistic market enjoy the freedom of free entry
and exit from the market. However, at times, because of legal barriers and patent rights, a new firm
cannot enter the market.
• v. Restricted entry of new firms- The entry into the monopolist market is restricted. In other words,
no new firm can enter the monopoly market. There may be various legal barriers such as, patent
rights, cartel laws, exclusive rights, etc. to restrict the entry of the new firms.
• vi. Elastic demand curve- The demand curve faced by the firms is highly elastic and slopes
downwards. This is because of the availability of a large number of close substitute products.

OLIGOPOLY
An oligopoly is when a few companies exert significant control over a given market. Together, these
companies may control prices by colluding with each other, ultimately providing uncompetitive prices in
the market. The term “oligopoly” refers to an industry where there are only a small number of firms
operating. In an oligopoly, no single firm enjoys a large amount of market power. Thus, no single firm is
able to raise its prices above the price that would exist under a perfect competition scenario.Examples
of oligopoly abound and include the auto industry, cable television, and commercial air travelitiit is also
known for satus symbol.

FEATURES OF OLIGOPOLY
• 1. Few Firms: There are few firms under an oligopoly market whose number is not exactly
defined. But, each of the firms under this market produces a significant part of the total output.
Each of the firms in the oligopoly market competes with each other severely and tries to
manipulate their product’s price and volume to outsmart each other. Also, the number of firms in
the market is so small that the action of one firm affects the rival firms. Therefore, every firm
keeps an eye on the actions/activities of other rival firms. For example, the automobile industry
in India comes under Oligopoly Market.
• 2. Non-Price Competition: The firms under an oligopoly market can influence the price of the
product; however, they try to avoid such influence as it can start a price war, which none of the
firms wants. In other words, if one firm tries to reduce the price of their product, then the other
firms will also have to reduce the price, and vice-versa because of which the firm can lose its
customers, ultimately intended to increase the price. Therefore, these firms follow the policy of
price rigidity, and hence prefer non-price competition. So, to compete with each other, the firms
use different methods other than pricing, such as after-sales services, advertising, etc.

FEATURES OF OLIGOPOLY
• 3. Interdependence: The firms under an oligopoly market are interdependent, which means
that the actions of one firm affect the actions of other firms. Every firm in this market
considers the actions and reactions of their rival firms before deciding the price and output
level of their products. A change in the price or output of one firm changes the reaction of
other firms operating in the same market. For example, if Maruti makes any change in the
price of its cars, then its rival firms such as Tata, Hyundai, etc., will also have to make
respective changes in their activities.
• 4. Barriers to Entry of Firms: There are only a few firms under oligopoly because of the
barriers to the entry of the new firms in this market. The new firms prevent themselves from
entering into the oligopoly market because of the large capital requirement, patents
requirement, and many other factors. Therefore, the new firms, which can cross these
barriers enter the market, which results in earning abnormal profits in the long run.
• 5. Role of Selling Costs: Selling cost is the cost spent on the advertisement, sales
promotion, and marketing of the product. As there is severe competition and
interdependence among the firms, they take help of selling costs to sell their product in the
market. Therefore, the firms under oligopoly market focus more on their advertisements and
other sales promotion techniques. The role of selling costs in the sale of products is more
than its role in a monopolistic competition market.

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COMPARISON BETWEEN PERFECT COMPETITION , MONOPOLY ,
AND MONOPOLISTIC COMPETITION