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Economics and Financial Accounting Module: By: Mrs - Shubhangi Dixit

This document provides an overview of industry analysis, market structure, the law of supply and demand, and elasticity in economics. It discusses different types of market structure like perfect competition, imperfect competition including oligopoly, duopoly and monopoly. It also defines monopsony, duopsony and oligopsony based on the number of buyers. The key aspects of supply and demand and elasticity are also summarized. The document is part of an economics and financial accounting module covering fundamental analysis at the industry level.

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Gladwin Joseph
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78 views

Economics and Financial Accounting Module: By: Mrs - Shubhangi Dixit

This document provides an overview of industry analysis, market structure, the law of supply and demand, and elasticity in economics. It discusses different types of market structure like perfect competition, imperfect competition including oligopoly, duopoly and monopoly. It also defines monopsony, duopsony and oligopsony based on the number of buyers. The key aspects of supply and demand and elasticity are also summarized. The document is part of an economics and financial accounting module covering fundamental analysis at the industry level.

Uploaded by

Gladwin Joseph
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 23

Economics and Financial

Accounting Module
By :
Mrs.Shubhangi Dixit

1
DAY 4

2
Day 4

• Industry Analysis
• Market Structure
• Law of Supply and Demand
• Equilibrium
• Surplus and Shortage

3
FUNDAMENTAL ANALYSIS:

4
INDUSTRY ANALYSIS

At the industry level, fundamental


analysis examines the supply and demand
forces for the products offered.
Market Structure

• How much is to be produced and at what price is to be sold are the


two decisions taken by an individual firm or producer. Both of these
are affected by the market structure.
• Firms sell goods and services under different market conditions,
which economists call market structures. A market
structure describes the key traits of a market, including the number
of firms, the similarity of the products they sell, and the ease of entry
into and exit from the market.
• The main factors, which determine the market structure, are:
• Number of Buyers and Sellers: ...
• Nature of the Commodity: ...
• Freedom of Movement of Firms: ...
• Knowledge of Market Conditions: ... 6
• Mobility of Goods and Factors of Production:
Market Structute

7
Market Structure

The major market system types are:


1) Perfect Competition with Infinite Buyers and Sellers. ...
2) Imperfect Competition
a) Oligopoly with a Handful of Producers. ...
b) Duopoly
c) Monopoly with One Producer. ...
3) Monopolistic Competition with Numerous Competitors. ...
4) According to Number of Buyers
d) Monopsony
e) Duopsony
f) Oligopsony 8
1. Perfect Competition or Pure Competition

• A market structure where a large number of buyers and sellers selling


homogeneous product and the price is determined by the industry.
All the times sell the product at one price.Ex. Local vegetable
farmers Grocery retailers Plumbing Dry cleaning businesses.
• Thus, we can say that perfect competition is characterized by a large
number of buyers and sellers with identical product selling on the
price with the perfect mobility of factors and perfect knowledge of
market conditions not influenced by either individual seller or buyer
in finalizing transactions. 
• The following are the salient features of the Pure competition
• A large number of buyers and sellers
• Homogeneous product
• Free entry and exit of firms in an industry
9
2. Imperfect Competition
• Another type of market structure based on competition is Imperfect competition. There
is a small number of firms selling the differentiated product.
• The concept of imperfect competition was developed by Mrs. John Robinson and
professor chamberlain in 1933. Under this market, there is a large number of buyers
and sellers which product differentiation, There are no restrictions on the entry and exit
of firms but there is an existence of non-price competition among the better of these
differentiated products.
• Imperfect competition in the stage between perfect competition and monopoly.
• On the basis of definitions of Imperfect competition we can say that the following are
the salient features of imperfect competition:
• A small number of buyers and sellers.
• Ignorance or laziness of buyers and sellers
• Product differentiation
• Difference in prices
• Non-price competition or advertisement and sales promotion.
• Highly transport cost.
• Other factors prevailing in the market namely Trademark, the behavior of sellers, 10
credit facility, home delivery and repair services, guarantee, samples, etc.
a) Oligopoly

• Oligopoly is also known as the competition among law. The word Oligopoly
is made up of Oligos + Pollen. Oligos mean few and Pollen means to sell.
• Oligopoly is one of the kinds of Imperfect competition. Such market
structure is found when the number of sellers is few. Oligopoly is a market
situation in which the number of sellers dealing in a homogeneous or
differentiated product in small.
• Thus, When oligopoly firm sells a homogeneous product it is called
Homogeneous Oligopoly. Whereas when a firm of an Oligopoly industry sale
differentiated the product, It is called Heterogeneous Oligopoly. It is also
known as differentiated Oligopoly.
• Oligopoly, in which a market is run by a small number of firms that together
control the majority of the market share.Ex. The market for sportswear such
as Adidas, Nike, Umbro, and Puma.
11
b) Duopoly

• A market wherein there are two sellers or producers of a


product is called do a Duopoly. They have a complete hold
over the supply of that product. A product of both the sellers is
Homogeneous and the prices are also the same.
• Both the firms are interdependent and they try to keep the
same price. If a seller of the commodity lowers the price then
the other seller is forced to reduce its price because customers
will prefer to purchase the cheaper commodity. Both the sellers
have to think about the possible impact when they are taking
independent decisions relating price and prediction.
12
c)Monopoly
• When there is a single seller or producer of commodity or service the
market structure is called a monopoly market.
• Definitions of Monopoly
• “It can be well remarked that the producer under pure Monopoly is
so powerful that he is always able to take the whole of all consumers
income whatever levels of his output.
• “A pure monopolist should be taken that who has full control out the
supply of a particular product.”Ex. Detergent manufactures in
Kenya, Unilever Kenya Limited, Bidco Company, and Procter and
Gamble.
• Prof. K.E. Boulding
• “A pure monopolist, therefore, is a Firm producing a product which
has no effective substitutes through the products of any other form
effective in the sense that even though the monopolist maybe making
abnormal profits, other firms cannot encroach on these profits by 13
producing substitute commodities which might and entice purchases
away from the product of the monopolist.
3. Monopolistic Competition

• It is one of the form/Types in perfect competition. There is neither perfect


competition nor pure monopoly market structures in practice. Monopolistic
competition is a market structure in between perfect competition and Monopoly. It has
some of the characteristics of perfect competition and some of the 
characteristics of the monopoly.
• Thus, Monopolistic competition is a market situation in which there are many sellers
of a particular product, but the product of each seller is in some way differentiated in
the minds of consumers from the product of every other seller.
• Types of monopoly
• Natural monopoly: Here, the costs of production are minimized by having a single firm
produce the product.
• Geographic monopoly: Based on the absence of other sellers in a certain geographic
area.
• Technological monopoly: Based on the ownership or control of a manufacturing
method or process.
• Government monopoly: Organization that is owned and operated by the government. 14
4.According to Number of Buyers

a) Monopsony
• A market where there is a single buyer of a commodity or
service is called Monopsony.
b) Duopsony
• A market where there are two buyers of a commodity or
product is called Duopsony market.
c) Oligopsony
• A market structure in which there are few buyers of a product
the market is called Oligopsony. These buyers can influence
the price in the market by an agreement of association.

15
Law of Supply and Demand

• What Is the Law of Supply and Demand?


• The law of supply and demand is a theory that explains the
interaction between the sellers of a resource and the buyers for
that resource. The theory defines how the relationship between
the availability of a particular product and the desire (or
demand) for that product has on its price. Generally, 
low supply and high demand increase price and vice versa.

16
KEY TAKEAWAYS

• The law of demand says that at higher prices, buyers will


demand less of an economic good.
• The law of supply says that at higher prices, sellers will supply
more of an economic good.
• These two laws interact to determine the actual market prices
and volume of goods that are traded on a market.
• Several independent factors can affect the shape of market
supply and demand, influencing both the prices and quantities
that we observe in markets.

17
Elasticity and Inelasticity

• What Is Elasticity?
• Elasticity is a measure of a variable's sensitivity to a change in
another variable. In business and economics, elasticity refers the
degree to which individuals, consumers or producers change
their demand or the amount supplied in response to price or
income changes. It is predominantly used to assess the change in
consumer demand as a result of a change in a good or service's
price.
• What Is Inelastic?
• Inelastic is an economic term referring to the static quantity of a
good or service when its price changes. Inelastic means that
when the price goes up, consumers’ buying habits stay about the
same, and when the price goes down, consumers’ buying habits 18
also remain unchanged.
KEY TAKEAWAYS

• Elasticity of demand refers to the change in demand when


there is a change in another factor such as price or income.
• If demand for a good or service is static even when the price
changes, demand is said to be inelastic.
• Examples of elastic goods include gasoline, while inelastic
goods are items like food and prescription drugs.

19
Elasticity vs. Inelasticity of Demand: An
Overview
• Inelasticity and elasticity of demand refer to the degree
to which demand responds to a change in another economic
factor. Elasticity of demand measures how demand changes
when other economic factors change. When a change in
demand is unrelated to an economic factor, it is called
inelasticity.
• Price is the most common economic factor used when
determining elasticity or inelasticity. Other factors include
income level and substitute availability.

20
Equilibrium

21
Surplus

22
Shortage

23

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