Professional Documents
Culture Documents
Structures
And Price Out
Determination
Market
Structures
Firms
and industries
Economic
efficiency
Perfect/pure types
Imperfect/non-pure
type
monopolistic competition
oligopoly
Pure
monopoly
Monopolistic
competition
Oligopoly
Market models
characteristics
Pure competition
There is a large number of independent
sellers.
Products are identical or homogeneous.
No single seller and no single buyer can
influence the change in the market price of
product.
It is easy for new firms or sellers to enter
the market and for existing firms or sellers
to leave the market.
There is no non-price competition like
advertising, sales promotion, or packaging.
Pure monopoly
There
There
Monopolistic
competition
Oligopoly
There
DETERMINANTS OF
MARKET STRUCTURE
Government
Technology
Business
PRICE OUTPUT
AND
DETERMINATION
Pure Competition
The demand curve of an individual
firm under a purely competitive
industry is perfectly elastic. This is
because the decrease or increase of
the output of a single seller has no
effect on the total supply and
market price.
o In the case of market demand curve
(demand curve of all producers of a
particular product), it is elastic.
o
o All
Table
5.1
Price
Quantity demanded
TR
MR
AR
P5
P5
P5
P5
10
15
20
25
Quantity
demanded
Graphical Analysis
Price
MC
AC
MR=Price
Pure monopoly
There
QD
Price
TR
MR
1
2
3
4
5
6
7
P50
45
40
35
30
25
20
P50
90
120
140
150
150
140
P40
30
20
10
0
-10
TR
Pric
e
D
Unit
s
Graphical Analysis
Price
Unlike
under pure
competition, the existence of
pure profits attracts the entry
of more new firms.
This results to lesser profits
until the point where only the
normal profits remain.
However, despite the
advantages of a monopolist,
he does not charge the
highest price because this
The
Monopolistic
Competition
OLIGOPOLY
Under