Types of market structures: description

In the modern economy, the types of market structures are divided according to the form and degree of freedom. Each type has its advantages and disadvantages.

The following main types of market structures are distinguished in the economy. The first of these is perfect competition - this is a market where a large number of small firms operate. They, as a rule, are engaged in the production of the same products. Therefore, they do not have the opportunity to independently control prices. An example of such markets may be the fish market, agricultural products or the securities market. All types of market structures have their own characteristics. Features of perfect competition:

1) Advertising is useless.

2) In order for another seller to join the production of similar products, there are no barriers.

3) The number of buyers in this market, as well as sellers, a great many.

The second type of market structure is monopolistic competition - it is a market where small firms produce the same products, but, nevertheless, they have the opportunity to control prices for it. In order for a producer to be able to raise the price of his goods, he must surpass his competitors in some way. This can be the quality of products or the quality of customer service. An important role in this is the provision of warranty service, the availability of which allows the seller to increase the price of his product. Also, the increase in value can be attributed to the location, because in a cafe near the house people will walk more often than in the one that is three blocks away. In this type of market structure, if there is any difference from the products of its competitors, it is necessary to give advertising to inform consumers about it.

Classification of market structures occurs by the number of firms present in this market. For example, the third type, that is, the oligopoly, is a market owned by several large firms. This happens because the barriers to entry into this industry are quite high. They are:

1) Huge start-up capital necessary to start the production of goods.

2) Trade secret.

3) The need to comply with copyright or patent law.

4) Mandatory production license.

Prices for goods in the oligopoly are set according to the principle of price leadership. And competition occurs around the consumer properties of goods. A lot of money is spent on advertising. Examples of such markets can be: the computer market, perfume market, cars, oil and telephones.

Types of market structures are distinguished, based on various characteristics and features. So the fourth kind is a monopoly, that is, a market that belongs to the only seller of a product that has no analogues. This type of market structure is not beneficial to consumers, since the monopolist is not interested in improving the quality of its product and its diversity, besides, it has the ability to set inflated prices. The entrance to such a market is blocked. Advertising is not necessary for a monopolist, since everyone knows about his product.