Module - Mavkel Structuse

he oeras
CCmahet isa plae or a prou65tuhere he nerad
tnor t huy o1 ell a
belween buyers and &lers takes plau
at a po»bialar plhce ovw
his meractoo may take plae
Proclice.
inemet. he defevent types of aket Seiet
elophone or thvauqh
ave explahed givern below;

Perfel Competrko
Perlect Compehbion isa maket SiBuahon In
whih thae
ad Sellers daaling in a homogeneous
ae a lange umber ofbyers
with per/ect lknocoledge auit the maket Cordihions and payet
Produd
mobilty ot gods and facto»s of prodauchon'"
The Important fctures are
a)Large unber o buyers ard elers No-of byers and selers are
So lange So o one an tnfluane pria anl Oulpat. t nasans bag,
ard Sellers have no Sigpiticant roe undes thais manket Stractute.

6) Hormagenecous Selers ane llig 1deotial

predluct; whh is
preduct
Sane in appearana, Colour, qua l'ty, Shae et IE means that
TEmeans that
therc is no produck di Hererntia hon
C)Homogeneouspna: e produt
is homogeneus o the pr
discrimind hon or chane in pria is not Possible

dperect knowhdge : Buyer

hove the perlect kowkdge akout
prie and quanbty.
Seler have the pesect krocwleclge about
factos prias
 40
re Pyeedorn of entrY and erit: thee s no restvichon of entry of ne
SelleY ad exit of any elors lEis due tw tha Ycason
of mo ono can
intluwne 0n prio and product

vel Evee mobilty of tactors of Prodeichon and goods: H ensures free move
ment of factois of produchen and
goods trom one place to arother plae.
g) No transotabon (ost and aduibsemont costlt ensurc tre transp
tabon Cost. De tb idonheal prockuct there Is mo Mæd of ary qdeshsement

Eguilibricum of im

TC, TR Appioach
Cundey thi's approach a tim coill be in equuubriun when

it produca that eel of Oatpcut where the di Hevena betueen TR arcd Te

t5 the maximum.

In the diavam tuhen the hsm

Produe s Q lovel of otuleut B

the difevene between TR

and Tc is the marimum Hene
itis the
B
equlbhiam output
To ftrd the equilibriun oukut
a
tangent is draun to the Tc
CcYUe which is parallel -to
oulput
Ehe TR CITve. his is the Case
th
pereck Ccmpe bbon
 D MC, nR Pppea ch
this appioach profit cuwill be
maimum twhen he
Uncle
tbllocwingtwo Condibons ave Sahshecl.

MC R ad MC Ccuts mR from the belocw.

Curve and MR 15 hozi20ntal CcYve tsnd
MC CUTUe *s a u shad
ean hoimal pront, 8uper normal
evfect Comeh'bon. A im can
ale cxplained given belocu
Proht ax loss, thxe

AC

MR:
P

Super normal Protit Nomul Profit

Loss
Elsthe equitbra E is the equlibrium
E ls he egulubria
Point cwhere mC = mR and point where mc=mR ardPoint.uhere mC =mk
Mc tat mR
Hror belocw. mc cts MR trom belcco and mc telh mHom
AC is k6S than AR
A
the EC is
m get Tomal proht kelocw. A tm is in
gap he proE whenAC- AR
ey Cunit. The aca PEcB loss when he Ac is
reaey than A.
s the tctal proht ol the
iim.

2Monopoly Struchtre
Cc
monopoly meansa Single Se lle r .
1E is a maket Srhuattn

in which a Stnle Selle Controls the entive Suply a a Comodety

o Other wosds monopost has the l l Control over prica ancd ocutput
hdon Raituwag is a
monopoly of tha puernmant.
he inmoportant fecttures ave,
Single ler: cnly a Singlh Selley cwho Cotrols etve proclcuchtn and
dhstibuhon of a Comodity. tt means acually ther 1s no Compchbion.
Undoy this there is no distnction between frm and industhy.

6)lo dose Sebshtues: monopollst ts Selling a produd cahich haw no

dose SubshHukes
c) price makey: he monopoist has he Coroplele poccey to decide th

tauxl ot pria and quanhly otkrd br Sale

d) prie discyiminaNon ard Supev normal piott : Drica disC1iminahon is
the most important echire of
monopoly. IE means chargng of
dofeent psias rom difeyent CCIsteme1S. though this process he can
eayo
SueY nosmal psottt.
e Baiers b entry: he treedom ot entry is Strictly
restrickd he
bariers may be in the tom of legal vest1ich'ons, erclusiue ccoreship
ek

Equilibium of fiv.
6) 9c, TR ppproach
Proht is maxirnum uhen the dlofercrne
etuween TR ad T is maximun. In the
Cuiqyam hangnts AB and Co ae dau
D o Tc and TR in Sach a uay that
thoy ave paralel. he gap betuen
 43
dukyen ketulern Tcad
AB and CD 't Sheocws the máximum

and im atain egul'brium ancd procdeces oQ loel of output 1

) mC, mR Appyoach

UScally a monopoli st eayn

Stuponomalpoft becaus the
monoolist has Compleoke Cortrol
ovCY the Supply of a Commodtty .

Pvi ca and ocueput dlalevminahon

15 explained cwith the heip of

| the tollouing cliaqram. R

Inthe diaqiam at point E, Me-MR

and MC Curve ner Sccts mR output
Curve trom beloco. Hence
Eis the equicbriium point and 0 ishe
equlbriam evel of Ocupat. when the m
pecleica o lavel of
ockut. en the tiTm produa 0 level ot output A is tho AR
Or prico. 8ut the averaq Cost is less than this ancd it is B.
Hena Af is the protit per anit. "the
1ectarglo PABC
pABc shocus
shous the
totas proft

Dumping: t maans a
monopoli'st sells his product at a
in the horne maket ad
highe) pndt
loue1prio in mevnabonal maket. ho
mau be to char the erce5S
o outdalecl stbck to
or incYea se
the makek Sheve 6i tb avotd
Compebtoys.
 44
Monopolishc Compehbom
is a mayket Situcuhon m which there ae a large
nunber of buyrs and selrs dealeng in a cli krenhakd product
me
product produacl by each Seller is not idenbcal they qve Close Subshtues
They may clikr in Color, shape and lasle ele

Impovtant ecttuves ave',

) Larqe numbey O buyers and elerS no of elers and uycs ar large
bauk not more than perkct Compebbon. esecialuy naobey cf Slors

8) prodauct ditferendahen: ndor this Situahon aus produds ar close suhs

ttubes. 1t ma ans that producb ae entrely lifreo To cah otbaY in
the Hbrm of Color, Shape, Sie, tase, quality, Packing eke It means
thaut each produc has fhair ocwn wniqaess
C) Selleng Cest or aduenbemont Cost each selle7 is Selling a prcduct
uhich ave Close Scehstttules. Hence heye is accuke Comehbon betueen
Seleys ancl they sped huce amocents on Qduerhse mont and othay Sales
promohonal achvibes
Fveedorn of Entry ad Ext: hexe ae no vestrichon on the entry or

Ce Impereckt knowledge: 1he intoimahon akocut maket Condrhon ikr pa,

MALAnisbaesoa

uauty,(oSE S mot untormly avuilablo b al buyje1s arcl elLD

Pria and Oclpat Deseimina bio)

A hm to monopoles bt (ompehbion is in eGuilibriam cheniE

cuhen it Praduas thak lowl of

maxinises prott Prohh is matimum

cczts mR hom belocw. Uscaily a t'vm

Ccutpcut when mc =mR and mc
 *

Can eam aiernomal prott

in the Short Yun. Itis explaiod |8
with tha help ot the gn Htquve
h the diaqam eqtullubrium R
Point 15 E. (mc MR, Mc tcrts
MR Hrom be loul) o Q is the
cqultbrium octput. tohen
Droducb'on is oQ ,awia9e
Cest 1s &B t RR S qealey
than AC cubich is
QA. The ditera
befue en Ac and AR iS knocon as AB iS the
protit per unit
Ot ocutpat. The aea of iectangle PABC is knocwn as total
ProTtt eaYnec by the tiim.

Not ak all iim coill ean Supeynormal profit. 5ome

tivmS ay ean nOY mal pont ard Somae tivms may IntY loss. hese
aie Shown below

Normal Proht

output
 46
when a tim ean novmal protit Cwhen a trm iUY losS Ac CYve

=mR Ccirve wrl be e s above tho AR Or Ac>AR.

at Ac , AR

to the AC (CIve or
AR 2 AC. he forhon phBC is the loss of he
tangent

T Oopoly Situation
Otgopoly 1s a masket Situahon in cwhich thore ax a
etthoy homoçenecus or dtherenialeed Pcdutt. Auiahon
tu SelerS Sellng a

Incdastry, ke comuni cauh on mdastry ae best examplos oluyoppiy Situahion

of
Sihucuhorn.
i a vieduty is the one ot the mpotant aspet ot olgoply
iopoitant kachuves a e
()Few SelcYs unde olgopoly a lecw Seiles clominak fha ertive industry.
he Sellers influona the pria of each othoy
CL)Homogeneaus or di erenbakd product: e procducls cve nt Comyplekely

homogenoaLs but cmehmes tis cliHeyenhakd. Acttomobru i's an example .

C) Bariets to entyy: here is mo legal kanicrs. Eoromic barriers ake hue

inuestment, Strong (onsamer loyalty tor exishng brand ee.

G) Muhual mleralopencdanca: It mplier that hrms are Infuancl by achothes
by
cuci'sion. îhe quanbty Sold che tim dopemls on its Ocwn price and price
of its Compebtors becouve ho ftms cloalo hengendcolhecheqenetuo Geocds
Existeme of pria rlqidhy: 1t rmaans thil tm donot pekr to

in of their prodoct because tt cuxi no be beneheal py thom

Chage pria
t one tm clarease the pria ofho twll also yetlece pie.
will afed
he proptabilrby ot the fivm
 4
hie ad ccdycd clelamind ho.- Kinked Demand Care melhordd

IEis introduct d by pactlm 5Suee2y. the kmked derrarod 15

CcIYve explain pria vigidity udo ougopolg banecd on Gnen asnph,

0)fa m mvea &s pre others cull not 4ollocw

cCwill also do ho Sam
) 1 a tYm decrcaS prko o fhovs

olyopoly it a tvmcuh
ndey

prie au othey Compehitors

aso Ccts thay pvicas Hene no
get any addihonal domarxl lut
thul proht get veduacd. So
the rms ae Sticks on theiy
frs. ln the Hiure tha lower MR

pat Ot demand Cuyve (AR) olpat

is less elastic becauSe a
ttYm cannot gain t1om pvia cut. "ihe uppey
a
Pait ot the domacl
CRR) CUTVe is elastit because thore cu) be a Scubstanba
move

all in demand. f hose ts a pvico hike. Itis the eaon to a kink

i n demond Curve AR) at oint R. CYeae a di sconhru
tothe mR Cuyue. A4 ha* Kink PMR emain
cunchangcd betueel
Pornt S ad R. MC, inkysect mR at foint S and on is the e
brium oukat. SpoSe Cost icycase and mc shifts to m2
there wil nol be
ay Change In equulibriam
pvia and Quant
hll mc 1eadh es th oint R in the
qap.
 ColluSive liopo
Cnler olnopoly tims ave tolerdlapenclont and taa Cut

To abid prco way ard lo SS tms ener ito an

throat Co bh'on.
pria and oclpat. 1E is knocwn as lalku ion
anrfpm
ac yeerent egarcling
in prevenhng anortainhes, prevent the entrq
ColleaSt on helps he tims
of the tims aganst
mew tmS and sxgthen the brgalning ouey
boye15
tormal agreement betuween thms. ishis
Corel: iS an explreit
Carel or

a kw Sellers and
the pradact
Kind of ColluSion 15 possible cshen there ore

iS homogeneoct S. Undor Corel thrms invel ve in prie ad oulpat

ahon
civiSion o protit, mazket Shan ete.. he mvin obiechve of CO1

is rred by domirart
Beducing the &yply ond raising the price prico
r ad othors cuil 6loc.

prica Leaolorship Uncler Collusion Somohimes the dominant trrmin the

irdustrySeb he prite and ofhors tollow it. he domirant him becones
the prica loacoy becCause of 6 large SI2e, la1ge ecoromies ot Scale or

bettr kechnology
Non- priop Ccrnpe bbion: Onctor oligopoly thore hs
very hg Compeh'hon is
exist.. tf the hm dry to tnevea se theiy market Shave through prie
Cornpehitron, 1t may vesalt in a pria war ms wtt be a
and hence the
CoSerS ence they ve Ort to ron pria Cormpeh'hon to incvease Sales. "nbn
Pri Coreblion isa mayket &rlegy tfhat typtcally tncludes Promohoai expn-
dtuve Such as Salos Stat, Salas promohon 5, Special ordo1s, Aree 9rtts,
Cocao5and acdwrhsing
 44
Product Piang
he moh prico o a produc is one cwhich Keeps all anh

Cipants of a maiket- Con&umers, Selles and Shavcholclors -happy

A tm should decide t prictng strdegy afer onsideting the
clegree of Cornpe bbo) in the mavket, pria of Compehtois product, (on
Objecve ot a tm aßo play an ino-
YS becy ng cayaci ty et
tant role in pvicng deciston because the objeches Ute preht
max imisahon and Salus nximi Sahon need di' ttient (Pvic ing
Srakgie
D Cost plus oi makap pvictng. undey this stralegy price iS the Sum

of CoSt and a prohit hargin. OSually Guerage Cost is used tor this

upe Se. thus pria cuiltlbe

P-AC+ , m is the percortage
mayk aup gererauyttis fob.
) Target Retuo picingJE is Similai to Cest
plus pricinq Pcct
he mai diffevena is that CoSt plus pvicing the piott margin
is decided arbitavily, cwhee as under this
me thod Produce
ahonauy decides the minimun rak ot etu10.
1) Penet ra tion pvicing. Chen a tv CuantS to eney inDa
masket cwhich is alieadey deminated
by exishoq fums, the enld
opticn 15 Coginga pico teSs han the
fhe etg o
ecisting price. Eamp
Jio intu the market
predatory pricirg. oder pvedatory pricta the dominan
tivm S its price s to lecu or a Su ficient periocd of tim
So tha it Cooehtors Leave the maket ad ote1s are
cokrred vorn enevin9 Afer that they mas chaxge higher pricu
) Cnoine rake pvicing his ts the StrakgY of tollocwinq the prevalling
mayket price inSfead of a Sepvak pricin9 Strakgy of ftheir ocwn. Osaalley
tn this case pria is hxed by a dlominant fim and othoys acapt it.
E is Generally adoplecl when the proccckb Solcl by the seller is wy
close uhsh iules

6l Drica SKimming: lE is the Strakgg of hargng highes pria deving

the mbrodtchbn of fhe produck alti tht hay redua Prias.

Vi). Admioislered priCing In Indtan Conkrt adminirkred pricnq hasans

is n d Stabtkorily, by he govt Deming Certain ocarions

pria
Govt e s fhe pria of Certasn esrenhal lomelsres on ocial hkiet-

price of Cookin gao is an eram2.