“Good marketing makes the

company look smart. Great

marketing makes the
costumer feel smart.”

-Joe Chernov
Objectives:
• Understand the different types of
market structures and its
characteristics.
• Determine it’s application and
importance in real life.
• Relate and give examples and its
impact to our society
What is Market?
• A market is where buyers and sellers can meet to
facilitate the exchange or transaction of goods and
services.

• Markets can be physical, like a retail outlet, or virtual, like

an e-retailer.

• Examples include illegal markets, auction markets, and

financial markets.

• Markets establish the prices of goods and services,

determined by supply and demand.
How Market Works?

• A market is any place where two or more parties can

meet to engage in an economic transaction
• Two parties are generally needed to make a trade
• Third party is required to introduce competition and
balance the market
MARKET IMPORTANCE
STRUCTURES OF 2 TYPES OF
MARKET MARKET
Refers to the STRUCTURES STRUCTURES
characteristics and • Competition
organization of a • Pricing and Perfect Market
particular market Profitability Imperfect Market
• Innovation and
Product
Differentiation
• Market
Efficiency
 Perfect
1
Competition
Large number of small
firms, output of any firm is
small relative to market
output (i.e. each firm is
price taker and does not
2
influence price).
 In a perfect market, refers to a theoretical
1 market Perfect
structure that meets specific
Competition
conditions
Large number of small
firms, output of any firm is
small relative to market
output (i.e. each firm is
2
price taker and does not
influence price).
 In perfect Market, refers to a theoretical
1 market structure that meets specific
conditions.
Perfect
Competition
Large number of small
firms, output of any firm is
Imperfect
small relativeMarket
to marketrefers to a
real-word market
output (i.e. each firm is
structures that deviate from
price taker and does not
the conditions of
2 perfect market.
influence price). In these
markets, certain
conditions may not be met, leading to market
inefficiencies and the potential for market
power.
Four Form
of
Imperfect
Market
• Price Taker
• Businesses are free to
enter and leave the market
at any time as there are no
barrier to entry and exit.
• Homogeneous or similar
but not identitical
• Limited Control
• Homogeneous and
Differentiated
• Has control over price
• No competition
• Highly standardizeds
Perfect Competition describe a market
structure whose assumptions are strong
and therefore unlikely to exist in most
real-world markets. It is market structure
in which the large number of firms all
produce the same product.
 Characteristcs
There is a large of
No one seller
Product are allor
Easy
one numberPerfect
for new
of
the samecan
buyer
firms Competition
tochange
enter
independent
cause a
(Homogeneous)
inand leave
price the
thesellers of a
market.
good
No one seller or
Easy is
There fora new
large
one buyer
Product arecan
all
firms to enter
number of
causethe a change
same
and leave the
independent
in the price of a
(Homogeneous)
market.
sellers
good
Characteristcs of
Perfect
Competition
 Monopolostic
Monopoly
Oligopoly No one seller or
There is a large
Competition Easy for new
one buyer
Product arecan
all
ThereA number
There
large isnumber of
onlynumber
are small oneof of firms to enter
producer
firms or seller
relatively of
smallselling
in the market causethe asame
change
independent
goods and or
businessesonly inone and leave the
differentiated identical in the price of a
(Homogeneous)
provider sellers
of services
competition
products with each in
market.
theother
market good Characteristcs of
Perfect
Competition
 Monopolostic
Monopoly
Oligopoly
There is a large
Competition
A number
Product are all
There
Therelarge isnumber
are small of
onlynumber
one
of of
producer
firms or seller
relatively of
smallselling
in the market the same
independent
goods and or
only
businesses inone
differentiated identical
(Homogeneous)
Perfect
providersellers
of services
competition
products
theother
with each
market
in

Competition Characteristcs of
Large number of small
firms, output of any firm is Perfect
No one seller or small relative to market
Competition
Easy for new output (i.e. each firm is
one buyer can price taker and does not
firms to enter influence price).
cause a change
and leave the
in the price of a
market.
good
 Monopolostic
Monopoly
Oligopoly
There is a large
Competition
A number
Product are all
There
Therelarge isnumber
are small of
onlynumber
one
of of
producer
firms or seller
relatively of
smallselling
in the market the same
independent
goods and or
only
businesses inone
differentiated identical
(Homogeneous)
Perfect
providersellers
of services
competition
products
theother
with each
market
in

Competition Characteristcs of
Large number of small
firms, output of any firm is Perfect
No one seller or small relative to market
Competition
Easy
output (i.e. for
each firm is new
one buyer can price taker and does not
firms
influence to enter
price).
cause a change
and leave the
in the price of a
market.
good
Monopolistic Competition
is a market structure that the existence of a fairly large number
of sellers, producing differentiated products with an easy entry
and exit in the market..
• A large number of relatively small businesses in
competition with each other
• Product differentiation which results in nonprice
competition.
• There are few barriers to entry,
• Brand identity is relatively weak
• Businesses are not price takers; however, they only
have a limited degree of control over the prices they
change
Oligopoly
Is market structure that there are only a few
numbers of sellers offering similar or identical
products in the market.
Few number of firms or few seller.
•Homogeneous and Differentiated
products
Entry is possible but difficult
n Interdependence and Uncertainty.
 1

Perfect
2
Competition
Large number of small
firms, output of any firm is
small relative to market
3
output (i.e. each firm is
price taker and does not
influence price).

4
1 Pure or Perfect Oligopoly

Perfect
2
Competition
Large number of small
firms, output of any firm is
small relative to market
3
output (i.e. each firm is
price taker and does not
influence price).

4
1 Pure or Perfect Oligopoly

Perfect
2 Imperfect or Differentiated
Competition
Oligopoly
Large number of small
firms, output of any firm is
small relative to market
3
output (i.e. each firm is
price taker and does not
influence price).

4
1 Pure or Perfect Oligopoly

Perfect
2 Imperfect or Differentiated
Competition
Oligopoly
Large number of small
firms, output of any firm is
small relative to market
output (i.e. each firm is
3price taker and Collusive
does not Oligopoly
influence price).

4
1 Pure or Perfect Oligopoly

Perfect
2 Imperfect or Differentiated
Competition
Oligopoly
Large number of small
firms, output of any firm is
small relative to market
output (i.e. each firm is
3price taker and Collusive
does not Oligopoly
influence price).

4 Non Collusive Oligopoly

Types of Organization Oligopoly
Cartel is a formal agreement among oligopolists to set-up a
monopoly price, allocate output, and share profit among members
Collusion – is a formal or informal agreement among oligopolists to
adopt policies that will restrict or reduced the level of competition in
the market.

MONOPSONY is a market situation which there is only one buyer of

goods and services in the market.

OLIGOPSONY is a market situation where there are small numbers

of firms competing to obtain the factors of production. Under this
market situation, firms are buyers and not sellers.
Monopoly
A firm that is the only seller and
controller of the entire supply of certain
good or service, with no close
substitutes in the absence of the
government intermediaton, free set the
price that will generate the largest
possible profit
Characteristics
• Single Producer/ Single Seller
• Price Maker
• Barrier to entry

Forms of monopoly
• Natural Monopoly
• Legal Monopoly
• Coercive Monopoly
 Market Structure Spectrum less competition

Perfect Monopolistic Oligopoly Monopoly

Competition
Competition
NO
Price and Output under Perfect Competition
Under perfect competition, the price of a good or
service is determined by the forces of supply and
demand.

The output of a firm under perfect competition is

determined by the profit-maximizing rule. This
rule states that a firm should produce the
quantity of output at which marginal revenue
equals marginal cost.
Price and Output under
Monopolistic Competition

Price and output determination under

monopolistic competition.
•determine the level of output
•determine the price
Price and output determination under
monopolistic competition in short run.
Price and output determination under
monopolistic competition in long run.
Price and Output under Oligopoly

-Doupoly
-Other firms

4 model theories
-Cournot
-Stackelberg
-Bertran
-Edgeworth
Price and Output under Monopoly

Monopoly refers to a market structure in which

there is a single producer or seller that has a
control on the entire market.
Demand: Decrease of price
Increase but less products.
Marginal cost: Increase, Increase
Marginal Revenue (Additional profit )equals
Marginal cost (Additional cost)