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[Type the document title]        [Type the document subtitle]        [Pick the date]        HP    
Structure of the Market
Market is an interactive area which may be in real or online, where buyers and sellers come and interact with each other for exchange of goods and services at a price that is satisfying for both the parties involved in the transaction. The price and quantity exchanged between the buyer and the supplier is relatively dependent on the bargaining power, market regulation and a number of other factors. For the purpose of market power identification, economists have identified four forms of the market structure that defines the way in which the transaction would take place. The four forms of the market are listed as under:
1. Perfect Competition
2. Monopoly
3. Monopolistic Competition
4. Oligopoly
Perfect Competition
Perfect competition, as the name suggest is perfect in its characteristic features and gives an equal bargaining power to all the participating buyers and suppliers participating in the market transaction. The characteristic features of perfect competition are listed below:
1. There are large number of buyers and large number of sellers in the market.
2. The market is dealing in homogeneous or identical products i.e. all products are same in the market.
3. Each buyer and seller is proportionately small as compared to the market and hence cannot influence the market price. They can only adjust the quantity of goods they wish to sale and purchase respectively.
4. There are no entry and exit barriers in these type of markets and any buyer or supplier is free to enter and exit the market as per their convenience.
5. The prices in the market are determined on the basis of market interaction of demand and supply and each buyer and supplier is known to be as the price taker.
6. The firms operating in the perfectly competitive industry work on the principle of profit maximization i.e. they sell the quantity at which their marginal cost is equal to the marginal revenues.
7. The firms face horizontal demand curve i.e Average revenue curve.
8. A horizontal average revenue curve implies an over lapping marginal revenue curve. Therefore, the profit maximization for a firm operating in the perfectly competitive market becomes:
MC= P
The graphical representation of the long run equilibrium of the perfectly competitive markets is given below:
In the long run all the firms earn zero economic profits and hence operate at the best possible level of economic efficiency.
These forms of markets are rare of find and more importantly too good to be true to be operational in today’s business environment. The market dealing in agricultural products are seen to have reflected the features of perfect competition. The perfect competitive markets are recognized as the markets with productive and allocative efficiency which is desirable form of factors. All the elements in the perfectly competitive market are said to be in equilibrium in the long run till the point when equilibrium is deliberately disturbed by the external factors.
Monopoly
Monopoly is...