3. Alternative Market Structures – Basic Concepts
Markets are essential systems for the exchange of goods and services, classified into four primary types based on competition: perfect competition, monopoly, monopolistic competition, and oligopoly. Each market structure has distinct characteristics and implications for pricing, competition, and market entry, affecting consumers and producers in various ways.
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What we have learnt
- A market facilitates the interaction between buyers and sellers for exchanging goods and services.
- Different market structures influence the level of competition and pricing strategies within an industry.
- Understanding these structures is crucial for analyzing economic behavior and market dynamics.
Key Concepts
- -- Perfect Competition
- A market structure characterized by a large number of buyers and sellers, homogeneous products, price-taking behavior, and free entry and exit.
- -- Monopoly
- A market structure where a single seller controls the entire market and has significant pricing power due to unique products and high barriers to entry.
- -- Monopolistic Competition
- A market structure with many sellers offering differentiated products, allowing some control over price while permitting free market entry and exit.
- -- Oligopoly
- A market structure dominated by a few large sellers, where firms are interdependent in pricing and often engage in price rigidity and non-price competition.
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