market structure

INTRODUCTION

Meaning and Definition

“MARKET is an arrangement that facilitates the buying and selling of the product, service and factor of production or future commitment”.

INTRODUCTION OF MARKET STRUCTURE

• In economics, Market Structure is the number of firms producing identical products which are homogeneous.

• Market Structure refers to the number and distribution size of buyers and sellers in markets of particular good and services. Market structure divided to perfect competition, monopolistic, monopoly, and oligopoly.

Types of Market

1. Perfect Competition2. Monopoly3. Imperfect competition

A) OligopolyB) Monopolistic Competition

1.Perfect Competition

According to Boulding, “the competitive market may be defend as a large number of buyers and sellers all engaged in the purchase and sale of identically similar commodity, who are in close contact with one another and who buy and sell freely among themselves”.

Features of Perfect competition• 1. Large number of buyers and sellers• 2. Homogeneous product• 3. Free entry and exit• 4. Perfect knowledge• 5. Demand curve of the firm

Example of perfect competition

• Credit Cards A credit card is a small plastic card issued to

users as a system of payment. Credit cards are issued by the banks which

allows a card holder to purchase goods on credit.

All banks in collaboration with Visa or Master Card provides the facility.

Credit card

Credit cards are the classic example of perfect competition.

• There are total 88 banks providing credit cards.

• SBI has the highest share at 25%

• Sellers and buyers are equally divided.

• Perfect Competition

Others3%

Bank of Maharashtra2% HSBC Bank

2%Kotak

Mahindra Bank3%

Standard Chartered

Bank9%

AXIS BANK11%

Barclays4%

Citi Bank7%

HDFC Bank21%

ICICI Bank12%

State Bank of India25%

MONOPOLY

• Monopoly is an extreme form of market structure. The word monopoly is derived from two Greek words-Mono and Poly. Mono means single and Poly means 'seller'. Thus monopoly means single seller.

Features of Monopoly

• 1. One seller and large number of buyers• 2. No close substitute• 3. Strong barriers to the entry into the

industry exist• 4. Price Maker• 5. Nature of demand curve

Types of Monopoly

• Private monopoly:• Public monopoly• Absolute monopoly: • Imperfect monopoly: • Simple or single monopoly: • Discriminative monopoly: • Legal monopoly:• Natural monopoly:• Technological monopoly:• Joint Monopoly:

Example of MonopolyIndian Railway• State owned company• Monopoly of country’s rail transport• April 16, 1853, first passenger train introduced between

Bombay & Thana.• Indian Railways having more than 64000 Kilometres of track

and 6909 stations. • It has the world’s 4th largest railway network after that of

United States, Russia and China. It carries over 20 million passengers and 2 million tons of freight daily.

Indian Railway

• It is one of the world’s largest commercial employers with more than 1.6 million employees.

• Indian railways has a position, which is not possible in perfectly competitive markets, where it can charge different price to different group of consumers for an identical product, even though the cost of each such saleable unit remains same.

Conclusion

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