Types of Market

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   Perfect Competition

• • There are infinite buyers and sellers in a perfect competition.
  • All the sellers sell identical products.
  • There is a complete freedom for firms to enter or exit the market.

It is only a theoretical concept

1. Monopolistic Competition

• • There are large number of buyers and sellers (but not infinite).
  • All the sellers in monopolistic competition have similar but not identical products.
  • There is visible cost which is often incurred on advertisement and promotions.
  • There is an easy entry and exit of firms.
  • Eg – Many firms selling burgers where all the burgers are made in a similar manner.

1. Oligopoly

• • It is a market scenario when a few companies exercise significant control over a given market.
  • It means that the number of sellers is generally in the range of 3 to 5 firms only.
  • It is a market condition in which price and quantity are closely monitored by competitors.
  • There is an invisible entry barrier for newer firms entering the market by way of mergers and acquisitions.
  • Formation of cartel (to determine price and quantity of products)
  • Eg- Telecom companies in India

1. Monopoly

• • There is only one seller in the market.
  • There is a complete barrier on entry for other firms.
  • The price of the goods or services (offered by the seller) is decided by the seller (as there are no substitutes for the products).
  • Eg – The Indian Railways

1. Monopsony

• • There is a single buyer and there are many sellers.
  • In this case, buyer is the price maker.

Eg – Railway equipment, which is sold by various domestic and Indian firms, but the buyer is only the Indian Railways.