 A market can be defined as a group of firms willing and able to sell a similar product or service to the same potential buyers.  Imperfect competition covers all situations where there is neither pure competition nor pure monopoly.  Perfect competition and pure monopoly are very unlikely to be found in the real world.  In the real world, it is the imperfect competition lying between perfect competition and pure monopoly.  The fundamental distinguishing characteristic of imperfect competition is that average revenue curve slopes downwards throughout its length, but it slopes downwards at different rates in different categories of imperfect competition.  Monopoly refers to the market situation where there is a  Single seller selling a product which has no close substitutes.  Monopolies are characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the existence of a high monopoly price well above the firm's marginal cost that leads to a high monopoly profit  The word “oligopoly” comes from the Greek “oligos” meaning "little or small” and “polein” meaning “to sell.” When “oligos” is used in the plural, it means “few” ,few firms or few sellers.  DEFINATION:  Oligopoly is that form of market where there are few firms and there is natural interdependence among the firms regarding price and output policy.

1. Market structures – Perfect
competition

2. MARKET
 A market can be defined as a group of
firms willing and able to sell a similar
product or service to the same potential
buyers.

3.  The essential constituents of a market can
are :
 Area
 Buyers and sellers
 Commodity
 Competition

4. Market Structures(market
morphology)
 Market structure refers to the number and
size of buyers and sellers in the market for
a good or service.

5. Major features that determine
market structure
 Number of buyers and sellers
 Nature of commodity
 Freedom of movement of firms
 Knowledge of market condition
 Mobility of goods and factors of
production

6. Classification of market
structures
 4 broad categories –
1. Perfect competition
2. Monopoly
3. Monopolistic competition
4. Oligopoly

7. PERFECT COMPETITION
 It refers to a market situation where there
are very large number of buyers and sellers
dealing in a homogeneous product at a
price fixed by the market.

8.  It is rare to find a pure example of perfect competition
 But there are some close approximations:
 – Foreign exchange dealing
• Homogeneous product - US dollar or the Euro
• Many buyers & sellers
• Usually each trader is small relative to total market and
has to take price as given
• Sometimes, traders can move currency markets
EXAMPLES

9.  – Agricultural markets
• Pig farming, cattle
• Farmers markets for apples, tomatoes
• Wholesale markets for fresh
vegetables, fish, flowers
• Street food markets in developing
countries

10. Perfect competition
 Features –
1. Large number of buyers and sellers
2. Products are perfect substitutes of each other;
homogeneous products
3. Free entry and exit from the market
4. Perfect knowledge of the market to both buyers
and sellers
5. Perfect mobility of factors of production
6. Absence of transportation costs
7. Absence of selling costs

11. Profit
 Normal Profit : That part of the cost that is
paid to the entrepreneur as a part of his
compensation.
 Super-normal Profit : The profit that the
entrepreneur may get over and above the
compensation he gets from the firm, for his
contribution.
REFERENCE

12. Perfect competition and pure
competition
Perfect competition is used in wider sense as compared to
pure competition.
The competition is said to be pure when the following three
fundamental conditions exist:
 Large number of buyers and sellers
 Products are perfect substitutes of each other;
homogeneous products
 Free entry and exit from the market

13. Firm is a price taker
 Under this an individual firm is a very
small unit of the entire market . Therefore,
a firm plays no role in price determination .
 So, firm is a price-taker and industry is the
a price-maker.
 Price is determined at a point where market
demand curve intersects supply curve.

14. Q
Qe
Pe
P
S
D
$
q
Firm- price takerIndustry – price maker
E
AR=MR

15.  In the above figure , the intersection of
demand(D) and supply curve(S) at point e,
at which OP price is determined. The price
is adopted by the firm , at this price and
firm is free to sell any quantity.
 This makes AR curve completely elastic
and thus parallel to the X-axis.
 According to AR and MR relation , when
AR is constant , MR=AR. So, AR curve is
also the MR curve of the firm .

16. THANK YOU