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In common language, the term market refers to a place, where goods are purchases and sold, such as Super Bazaar, Connaught Place. The term market should not ignore the demand and supply of the commodities. It may be local, national and international such as Foreign exchange market.
Market Structure
Market Structure means layout of the market from which firm purchases its inputs and where it sells its output. The classification of market structures is based upon the following elements : The number of firms producing the product The nature of product produced by the firms Price elasticity of the demand of the product produced by the firm
Number of firms
Nature of Product
Perfect Competition
Homogeneo us Product
Infinite
Monopoly
No close substitute
Very small
High
Definition
In the words of Bilas, the perfect competition is characterized by the presence of many firms. They all sell same product. The seller is a pricetaker.
Price 5 4
3
2
60
80
60
40
Monopolistic Competition
Imperfect competition, is the actual market which we encounter in our daily life. Of all kinds of imperfect competition, the most important one is monopolistic competition. Monopolistic Competition may be described as a combination of both perfect competition and monopoly or blending of the two. It refers to that market situation in which large number of producers produce goods which are close substitutes of each other.
Definition
According to J.S.Bain, Monopolistic Competition is found in the industry where there is large number of small sellers, selling differentiated but close substitute products.
What is Monopoly ?
The word Monopoly is composed of two words : (i) Mono-which means single (ii) Poly- which means seller Thus, monopoly is a market situation in which there is a single seller of a good with no close substitutes.
Definition
In the words of J.S.Bain, Price Discrimination refers strictly to the practice by a seller of charging of different prices from different buyers for the same goods.
SELLING COSTS
In order to sell their products, firms under monopolistic competition have to spend a lot on advertisement and publicity. In Economics, the total amount of money spent on advertisement and publicity for pushing the sale of the product is called selling cost.
Selling costs refer to those costs which are incurred to increase the sale of the product e.g. expenditure on advertisement, publicity, commission to retailers, gifts and concessions to customers etc.
Definition Selling costs include all expenses incurred to increase the demand for the goods.
Assumptions:
Selling costs are based on two assumptions : Buyers taste and demand can be changed Buyers do not have full knowledge about the various types of product.
MEANING OF OLIGOPOLY
The term Oligopoly is derived from two Greek words. Oligoi means few and Pollen means to sell. Oligopoly is an imperfect market where there are a few sellers in the market, producing either identical products or producing products which are close but not perfect substitutes of each other. For Example, Steel, tyres, automobiles etc.
CLASSIFICATION OF OLIGOPOLY The Oligopoly may be classified on the following basis : On the basis of Product Differentiation Perfect or Imperfect Oligopoly On the basis of Entry of Firms Open or Closed Oligopoly