To define market and market structures
To describe the differences of the different market structures
We usually think of a market as a place where some sort of exchange occurs; however, a market is not really a place at all. A market is the process of exchanging goods and services between buyers and sellers. Ruffin & Gregory (1997) defines a market as an established management that brings buyers and sellers together to exchange particular goods and services. A A market, therefore, exists when these three elements are present, namely; a buyer, a seller and a facility for exchange.
In an economy where there are numerous goods and services offered for exchange, several market structures prevail. The structure of a market is basically defined by the concentration of firms in an industry that produce a specific product, either with similar or with differentiated characteristics. Whether the industry has less or more concentration of firms determine how producers or sellers develop their market power in terms of their control over supply and pricing strategies. Consumers also adjust their buying decisions with varied pricing structures and supply levels due to the nature of the market where such goods and services are being sold.
There are generally four market structures, namely; perfect competition, monopolistic competition, oligopoly and monopoly. The latter three structures are also considered as imperfect competition. The type of market structure can be described by the number of sellers or firms, the nature of product, entry and exit barriers, and degree of control over price, among other factors.
A perfectly competitive market exists where there are many sellers of homogeneous product in the market. These sellers are usually small in size with relatively low level of capital which makes it attractive for many to enter the market easily. There is a high...
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