Differentiate various market structures in

terms of:
a. number of sellers
b. types of products
c. entry/exit to market
d. pricing power
e. others
A. Numbers of Sellers

• Perfect Competition: A large number of sellers, so no single seller has a

significant influence on the market price.

• Monopolistic Competition: A large number of sellers, but each seller offers

a product that is differentiated in some way from the products of its
competitors.

• Oligopoly: A small number of sellers, so each seller is aware of the actions

of the other sellers and how their own actions will affect the market price.

• Monopoly: A single seller, so the seller has complete control over the market
price.
B. Types of Products
• Perfect Competition: Sellers offer homogeneous products, meaning
that the products are identical or very close substitutes for each other.
• Monopolistic Competition: Sellers offer differentiated products,
meaning that the products have some unique characteristics that make
them different from competing products.
• Oligopoly: Sellers may offer homogeneous products or differentiated
products.
• Monopoly: The seller is the only source of the product, so it can be
homogeneous or differentiated.
Here's a table that
summarizes the
different market
structures
 C.
Market Entry
• Profitability: If existing businesses in a market are making profits, it incentivizes
other businesses to enter the market, hoping to capture a share of those profits.
This can increase competition and potentially lead to lower prices for consumers.
• Barriers to entry: These are factors that make it difficult for new businesses to
enter a market. They can include things like high startup costs, regulations, or the
need for specialized knowledge or technology. High barriers to entry can limit
competition and give existing businesses more power to set prices.
• Demand growth: If demand for a product or service is growing, it can create an
opportunity for new businesses to enter the market and be successful.
Market Exit

• Profitability: If businesses in a market are consistently losing money,

they may be forced to exit the market. This can reduce competition and
potentially lead to higher prices for consumers.
• Changes in regulation: New regulations can make it more expensive
or difficult for businesses to operate in a market, which can lead to
some businesses exiting.
• Changes in consumer preferences: If consumer preferences shift
away from the products or services offered by businesses in a market,
those businesses may be forced to exit the market.
D. Pricing Power
Pricing power refers to a business's ability to set and maintain higher prices for its
products or services without a significant decrease in sales.
Here are some key points about pricing power:
• It's a competitive advantage: Businesses with strong pricing power have an edge over
competitors, as they can potentially generate higher profits and weather economic
downturns better.
• Factors influencing it: Several factors can influence a business's pricing power,
including:
• Unique or differentiated products: If a product has no close substitutes or offers
unique features, customers may be willing to pay a premium price.
• Brand reputation and customer loyalty:
Strong brand recognition and loyal customers can make customers less price-sensitive.
• Switching costs: If switching to a competitor's product or
service is difficult or expensive, customers may be less likely to
do so even if the competitor offers a lower price.
Understanding pricing power is important for both
businesses and consumers:
• Businesses: Can use strategies to build and maintain their
pricing power to achieve their financial goals.
• Consumers: Can be more informed about the factors
influencing the prices they pay for products and services.
E. Other factor

Information: Perfect information flow in perfect competition,

less transparency in others.
Non-price competition: More common in monopolistic
competition and oligopoly (e.g., advertising, branding).
Innovation: Varies depending on the structure, with
monopolies having less incentive due to lack of competition.