We can classify markets systems into two Perfect Competition and Imperfect Competition. Where Imperfect competition can be further divided into Monopoly, Oligopoly, Monopolistic Competition, and Monopsony.

Perfect Competition

A perfect competetion market should have the folloeing features:

  1. A large number of buyers and sellers are present
  2. Homogeneous goods are sold
  3. No restriction on entry or exit to the market
  4. Both buyers and sellers have perfect knowledge of quantity, price etc
  5. Free movement of goods
  6. Price Takers, The sellers take the price which is determined by the market forces. If the seller tries to manipulate prices the buyer would go for other options.

Monopoly

In a pure monopoly market, there would only be one seller for a particular product. Also, no close substitute for that particular product would be available, hence it enables the seller to manipulate the price of the product. The real problem is, what if the price they charge is too high and it is beyond the customer’s ability to pay? The answer is simple it would affect their revenue. The sailent features of monopoly markets are:

  • only one Seller for a Product
  • Entry Restrictions are present
  • No Close Substitutes are availabele
  • Price Maker, they decide the price.

Oligopoly

Oligopoly market is a market with few sellers, who sells homogeous or diffrentiated products. Sailtent featurws are:

  • Sellers are few in number
  • The interdependence of firms exist. As there are few sellers competition prevails. so each firm should be cautious about the actions of other firms and should make timely changes in order to escape the turmoil
  • Selling cost is included
  • Competition prevails
  • Exit from the market is easy, but certain procedures to entry are there which makes the entry difficult

Monopolistic Competition

It is a market which have the featues of monopoly and perfect competition.

  • It has large number of buyers and sellers
  • There is freedom for entry and exit
  • Diffrentiated products are available
  • Selling price included
  • Sellers and buyers lacks perfect knowledge

Monopsony

A monopsony is a market with only one buyer for a particular good or service, Which gives the buyer a significant power in determining the price of products.The salient features are:

  • Single buyer
  • Buyers have the power bargain for better price
  • Restrictions for entry into the market are there, but its free for exit.

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