Market structure

---

28.11.2020

Market structure - Wikipedia

https://en.wikipedia.org/wiki/Market_structure

1/4

Adam Smith

Market structure

Market  Structure  in  economics,  depicts  how  firms  are

differentiated  and  categorised  based  on  types  of  goods  they  sell

(homogenous/hetergenous)  and  how  their  operations  are

affected  by  external  factors  and  elements.  Market  structure

makes  it  easier  to  understand  the  characteristics  of  diverse

markets.

History

Types

Features of market structures

See also

References

External links

Market  Structure  has  been  a  topic  of  discussion  for  many  economists  like  Adam  Smith  and  Karl

Marx]] who have strong conflicting viewpoints on how the market operates in presence of political

influence. Adam Smith in his writing on economics stressed the importance of laissez-faire principles

outlining  the  operation  of  the  market  in  the  absence  of  dominant  political  mechanisms  of  control,

while  Karl  Marx  discussed  the  working  of  the  market  in  the  presence  of  a  controlled  economy

[1]

sometimes  referred  to  as  a  command  economy  in  the  literature.  Both  types  of  market  structure

have been in historical evidence throughout the twentieth century and twenty-first century.

Based on the factors that decide the structure of the market, the main forms of market structure are

as follows:

1. Perfect competition, refers to type of market where there are many buyers that features low

barriers to entry, many sellers, dealing with homogenous products with no differentiation, where

price is fixed by the market. Individual firms are price taker

[2]

 as the price is set by the industry as

a whole. Example: Agricultural products which have many buyers and sellers, selling

homogenous goods where the price is determined by the demand and supply of the market and

not individual firms.

2. Imperfect Competition refers to markets where standards for perfect competition is not fulfilled

(such as no barriers for entry and exit, homogenous products and many buyers and sellers). All

other types of competition come under imperfect competition.

Monopolistic competition, a type of imperfect competition where there are many sellers, selling

products which are closely related but differentiated from one another (e.g. quality of products

may differentiate) and hence they are not perfect substitutes. This market structure exists when

there are multiple sellers who attempt to seem different from one another. Examples: toothpaste,