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    The document discusses different forms of markets including perfect competition, monopolistic competition, monopoly, oligopoly, and duopoly. It provides details on perfect competition, noting that it exists when there are many small buyers and sellers of homogeneous products, with price determined by supply and demand. Key characteristics of a perfectly competitive market include freedom of entry and exit, perfect information, identical products, and prices set by supply and demand with firms as price takers. In the long run, firms will enter if economic profits are above zero and exit if economic losses occur, until normal profits are achieved.

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    The document discusses different forms of markets including perfect competition, monopolistic competition, monopoly, oligopoly, and duopoly. It provides details on perfect competition, noting that it exists when there are many small buyers and sellers of homogeneous products, with price determined by supply and demand. Key characteristics of a perfectly competitive market include freedom of entry and exit, perfect information, identical products, and prices set by supply and demand with firms as price takers. In the long run, firms will enter if economic profits are above zero and exit if economic losses occur, until normal profits are achieved.

    Copyright:

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    5 views17 pages

    Forms of Marketing

    Uploaded by

    Mayur Gupta
    The document discusses different forms of markets including perfect competition, monopolistic competition, monopoly, oligopoly, and duopoly. It provides details on perfect competition, noting that it exists when there are many small buyers and sellers of homogeneous products, with price determined by supply and demand. Key characteristics of a perfectly competitive market include freedom of entry and exit, perfect information, identical products, and prices set by supply and demand with firms as price takers. In the long run, firms will enter if economic profits are above zero and exit if economic losses occur, until normal profits are achieved.

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    of 17

    Module II Different Forms of Market

    Concept of Market
    Market refers to a system where the prices of goods and services are set by supply and demand. In other words, it is totally based on supply and demand.

    Different Forms of Market


    Perfect Competition:- Large No. of buyers and sellers. Monopolistic Competition:- Many sellers offering differentiated products to many buyers. Monopoly Competition:- Single seller and many buyers. Oligopoly Competition:- Few sellers and many buyers. Duopoly Competition:- Competition between two firms.

    Perfectly competitive market


    Perfect competition exists when there are a large number of buyers and sellers of a homogenous product and its price is determined by the forces of demand and supply. According to John Robinson, Perfect competition prevails when demand for the output of each producer is perfectly elastic.

    Characteristics/Features

    Large number of buyers and sellers, Identical (also known as homogeneous) products, Freedom of entry or exit, Buyers and sellers have perfect information, One price, Perfect mobility of factors, and No government intervention.

    Demand curve facing a single firm


    no individual firm can affect the market price demand curve facing each firm is perfectly elastic

    Profit maximization

    produce where MR = MC

    P = MR

    Normal Profits in the Short-run

    Abnormal Profits in the shortrun (Abnormal Profit > 0)


    Abnormal profit

    Loss in the Short-run (AVC<P< ATC)

    Loss if shut down

    Break-even point

    If price = minimum point on ATC curve, economic profit = 0. Owners receive normal profit. No incentive for firms to either enter or leave the market.

    P < AVC

    Short-run supply curve

    A perfectly competitive firm will produce at the level of output at which P = MC, as long as P > AVC.

    Long run

    Firms enter if economic profits > 0


    market supply increases price declines profit declines until economic profit equals zero (and entry stops) market supply decreases price rises losses decline until economic profit equals zero

    Firms exit if economic losses occur


    Long-run equilibrium in the Normal Profit

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