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Market structure makes it easier to understand the characteristics of diverse markets. The main body of the market is composed of suppliers and demanders. Both parties are equal and indispensable. The market structure determines the price formation method of the market.
"The market" denotes the abstract mechanisms whereby supply and demand confront each other and deals are made; in its place, reference to markets reflects ordinary experience and the places, processes and institutions in which exchanges occurs [15] "The market" signifies an integrated, all-encompassing and cohesive capitalist world economy.
A market structure is defined by three factors which are barriers to entry, number of firms in the market, and product substitutability. Below is the market structure for a monopoly: Market structure for a monopoly
A monopolistically competitive market is a productively inefficient market structure because marginal cost is less than price in the long run. Monopolistically-competitive markets are also allocative-inefficient, as the company charges prices that exceed marginal cost.
If there is a single seller in a certain market and there are no close substitutes for the product, then the market structure is that of a "pure monopoly". Sometimes, there are many sellers in an industry or there exist many close substitutes for the goods being produced, but nevertheless, companies retain some market power.
A market system (or market ecosystem [1]) is any systematic process enabling many market players to offer and demand: helping buyers and sellers interact and make deals.It is not just the price mechanism but the entire system of regulation, qualification, credentials, reputations and clearing that surrounds that mechanism and makes it operate in a social context. [2]
An open oligopoly market structure occurs where barriers to entry do not exist, and firms can freely enter the oligopolistic market. In contrast, a closed oligopoly is where there are prominent barriers to market entry which preclude other firms from easily entering the market. [ 14 ]
The degree of market power firms assert in different markets are relative to the market structure that the firms operate in. There are four main forms of market structures that are observed: perfect competition, monopolistic competition, oligopoly, and monopoly. [11] Perfect competition and monopoly represent the two extremes of market ...