A study on market structures in economy

Hotelling built a model of market located over a line with two sellers in each extreme of the line, in this case maximizing profit for both sellers leads to a stable equilibrium. As pointed out by Prof. He can do either of the two things. In socialist economic systems socialismproduction for use is carried out; decisions regarding the use of the means of production are adjusted to satisfy economic demand; and investment is determined through economic planning procedures.

Such perfect knowledge of market conditions forces the sellers to sell their product at the prevailing market price and the buyers to buy at that price. Perfect Competition vs Pure Competition: Each seller has direct and ascertainable influences upon every other seller in the industry.

There is recognised interdependence among the sellers in the oligopolistic market. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms.

Goods are free to move to those places where they can fetch the highest price. Thus the duopoly problem can be considered as either ignoring mutual dependence or recognising it.

Such a demand curve is much more elastic for price increases than for price decreases. The demand of individual buyer relative to the total demand is so small that he cannot influence the price of the product by his individual action.

Products are close substitutes with a high cross-elasticity and not perfect substitutes. All rivals enter into a tacit or formal agreement with regard to price-output changes. If he does so, his customers would leave him and buy the product from other sellers at the ruling lower price.

In other words, there is no discrimination on the part of buyers or sellers. Such perfect knowledge of market conditions forces the sellers to sell their product at the prevailing market price and the buyers to buy at that price.

An oligopoly industry produces either a homogeneous product or heterogeneous products. Political economy; legal institutions; property rights.

If, on the other hand, each seller takes into account the effect of his policy on that of his rival and the reaction of the rival on himself again, then he considers both the direct and the indirect influences upon the price. This situation is shown in Figure 1 where KD1 is the elastic demand curve and MD is the less elastic demand curve.

On the other hand, again motivated by profit maximisation each seller wishes to cooperate with his rivals to reduce or eliminate the element of uncertainty.

If the oligopolist seller does not have a definite demand curve for his product, then how does he affect his sales. He has to accept the price for the product as fixed for the whole industry. Or, once he sets the price for his product, his output is determined by what consumers will take at that price.

This condition implies a close contact between buyers and sellers. Each firm produces a distinct product and is itself an industry. Productive enterprises; factor and product markets; prices; population.

The Four Types of Market Structures. There are quite a few different market structures that can characterize an economy. However, if you are just getting started with this topic, you may want to look at the four basic types of market structures first.

Namely perfect competition, monopolistic competition, oligopoly, and monopoly. An economic system (also economic order) is a system of production, resource allocation and distribution of goods and services within a society or a given geographic douglasishere.com includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community.

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Economic Market Structures.

Are you looking for ways to engage your students in learning about economic market structures? The concepts of economic market structures (competitive market.

Market structure is best defined as the organisational and other characteristics of a market. We focus on those characteristics which affect the nature of competition and pricing – but it is important not to place too much emphasis simply on the market share of the existing firms in an industry.

Market participants consist of all the buyers and sellers of a good who influence its price, which is a major topic of study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand.

A study on market structures in economy