perfect and imperfect competition

1. MARKET
STRUCTURE
By MLJT

2. 2 types:
 Perfect Competition Imperfect
Competition
- number of buyers & sellers
- the ability of individual buyers & sellers to
affect prices
- the freedom of firms to enter and leave
the industry
- whether the products being sold by different
firms are identical/ somewhat different

3.  occurs in an industry when there are
MANY SMALL PRODUCERS who are
selling IDENTICAL PRODUCT, with EASY
ENTRY.
 It results in lower prices and greater
quantity
Perfect Competition

4. Perfect Competition
 Many Buyers
 Many Sellers
 Homogeneous
Products
 Freedom of Entry &
Exit
 Perfect Information
Characteristics: Examples:

5.  Exists when individual sellers exercise an amount of control
over the price of their output.
(it does not necessarily mean that control is absolute
because a firm does not have complete discretion over the
price at which it sells the good.)
 Refers to any form of market structure other than perfect
competition and would thus include MONOPOLY,
MONOPOLISTIC COMPETITION, OLIGOPOLY and
MONOPSONY.
IMPERFECT COMPETITION

6. MONOPOLY
Exampl
e:
 Only ONE (1) seller of a good/
service
(note: because seller is large relative to
the market, the action of the seller
affects the market price.)
 Barriers to Entry
- Factors that prevent the entry
of new firms to the market.

7. BARRIERS TO ENTRY:
 Legal Restrictions
 Patents
 Exclusive
Ownership of a Key
Resource or Input
 The Need for a
Large Investment
 Gov’t gives a license
to only a single
company provider
 Gov’t gives
exclusive right to
produce the
products
 The need for a large
investment
discourages entry
into the market
Explanation:

8. OLIGOPOLY
 Few sellers
( note: because Each seller is large relative to the market,
the action of one seller affects the market price.)
 Price is determined by the actions taken by all sellers.
ex. Mobile communication
 CARTEL
- A group of sellers of a product who
have joined together and coordinate their
actions

9. MONOPOLISTIC
COMPETITION
 Many firms sell
products that are
relatively close
substitutes that are not
completely
homogenous
 Basically perfect
competition plus
product differentiation
 Products are
differentiated by
quality, packaging &
supplementary
 Many sellers
 Firms sell products
that are similar but
not identical
 Firms are free to
enter & exit the
industry
 Perfect information
Characteristics:

11. MONOPSONY
 A monopsony ( mono (one) + Greek
opsonein (buy provisions) is a market
situation in which there is only ONE
BUYER.
Ex. Tobacco grower

12. Young Economists
FOR LISTENING……